Private Placementvis a vis Preferential Allotment Companies Act, 2013
Section42 of the new Companies Act, 2013deals with private placement. Any offer of securities or invitation tosubscribe to securities to 200 persons or less (excluding qualifiedinstitutional buyers and employees) in a financial year will be a ‘privateplacement’ under Section 42(2) of the Companies Act, 2013. Reading the Rule13 of the of Companies (Share Capital and Debentures) Rules, 2014 makesit is very clear that any preferential allotment by rights issue has to complywith private placement.
Asper the amended definition of 2011, ‘preferential allotment’ meansallotment of shares or any other instrument convertible into shares includinghybrid instruments convertible into shares on preferential basis made pursuantto the provisions of sub section(1A) of section 81 of the Companies Act, 1956.Earlier, preferential allotment envisaged a situation when a listed issuerissues shares or convertible securities, to a select group of persons in termsof provisions of Chapter XIII of SEBI (DIP) Guidelines.