I. Issue of preference shares by way of right issue
1) Right issue is when shares are offered to existing shareholders
a) Offer period to be not less than 15 days and not more than 30 days, if not accepted shall be
deemed to be declined
b) The notice shall include a right to renounce
2) To employees under ESOP subject to passing of special resolution
3) To any other persons authorized by special resolution
4) The notice must be dispatched through registered post or electronic mode
5) Where debentures have been issued and govt considers it necessary in public interest, it must by
order direct debentures to be converted to equity even if terms of issue do not provide for the
same; the govt shall while issuing order and determining terms of conversion of debenture have
regard to financial position of company, terms of issue of debenture, interest payable
6) Where such order of conversion has effect of conversion, the authorized capital of company shall
stand altered and increased equal to value of shares
I. Private placement
1. Must be done by way of offer letter
2. Must not be made to more than 50 excluding qualified institutional buyers and employees
under ESOP
3. allotments pursuant to previous offers must have been completed
4. offer which is not in compliance with this section shall be treated as public offer and sebi act
1992 and securities contract regulation act shall be complied with in respect of the same
5. Money payable under this offer must be through cheque or demand draft but not cash
6. Allotment within 60 days of receipt of application money failing which refund within 15 days
of completion of 60 days, if fails to repay application money then interest @12 from sixteenth
day
7. Money must be kept in a separate bank account and shall not be utilised for any purpose other
than—
a. for adjustment against allotment of securities; or
b. for the repayment of monies where the company is unable to allot securities
8. All offers covered under this section shall be made only to such persons whose names are
recorded by the company prior to the invitation
9. record of such offers shall be kept by the company in such manner
10. offer shall be filed with the Registrar within a period of thirty days of circulation of relevant
private placement offer letter.
11. No release of any public advertisements or utilise any media, marketing or distribution
channels or agents to inform the public at large about such an offer.
12. file with the Registrar a return of allotment including the complete list of all security-holders,
with their full names, addresses, number of securities allotted and such other relevant
information as may be prescribed.
13. If a company makes an offer or accepts monies in contravention of this section, the company,
its promoters and directors shall be liable for a penalty which may extend to the amount
involved in the offer or invitation or two crore rupees, whichever is higher, and the company
shall also refund all monies to subscribers within a period of thirty days of the order imposing
the penalty.