M&A Critique


Companies Act 2013 majorly specifies only 3 modes of raising finance for companies viz: Public Issue, Rights Issue and Private Placement.

Generally, for need based funding, companies always prefer private placement as an alternative for raising funds as the investors are usually identified beforehand. Also, Private companies have only two alternatives of raising funds, public issue not being applicable. Private Placement has therefore been the most utilized and at the same time, the more strenuous process owing to the restrictive provisions and heavy compliances mentioned in the Act and the Rules framed thereunder.

Vide the Companies Amendment Act 2017, the earlier Section 42 has now been replaced with a complete new section.  Currently, only the provisos to the sub sections of Section 42 have been enforced w.e.f. 7th of August 2018. Along with the Section, Rule 14 w.r.t. Private Placement in the Companies (Prospectus & Allotment of Securities) Rules, 2014 has also been amended to bring about the effective changes.

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Sayali Shrotri