By S&S Co. Advocates & Solicitors · Published 24 September 2026 · Informational content, not legal advice — see our disclaimer
Special Resolution Comes First
Private placement under Section 42 of the Companies Act, 2013 means offering securities to a select, identified group of persons rather than to the public at large. It requires a prior Special Resolution of the shareholders approving the specific offer or invitation before the offer letter is issued to prospective investors — the approval must precede the offer, not follow it.
The 200-Person Cap and the Offer Letter
Under Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014, an offer can be made to not more than 200 persons in aggregate, per class of security, in a financial year — excluding qualified institutional buyers and employees receiving securities under an ESOP scheme, who do not count toward this cap. Exceeding the 200-person limit deems the offer a public issue, triggering the far more onerous prospectus requirements that private placement is specifically meant to avoid.
The private placement offer letter, in Form PAS-4, must be issued only to the specifically identified persons — it cannot be circulated publicly or through any media, marketing channel, or agent — and application money from investors must be received only through banking channels, never in cash.
Allotment and Filing Deadlines
Securities must be allotted within 60 days of receipt of the application money. If allotment does not happen within that period, the company must refund the money within 15 days of that 60-day period expiring, and failure to do so attracts interest at 12% per annum running from the 60th day. The company must then file the return of allotment in Form PAS-3 with the Registrar of Companies within 15 days of allotment, and separately file details of the private placement offer letter with the Registrar within 30 days of circulating it, together with the complete list of offerees.
Restrictions and Consequences of Non-Compliance
A company cannot make a fresh private placement offer of the same kind of security until an earlier allotment under a prior offer has been completed, withdrawn, or has otherwise lapsed — private placements cannot be run in overlapping, parallel tranches for the same class of security. Non-compliance with Section 42's conditions exposes the company and every officer in default to penalties, and can also require refund of the monies raised together with interest, so the approval, offer-letter, and filing sequence should be followed precisely rather than treated as a formality to be tidied up after the fact.
Frequently Asked Questions
What shareholder approval is needed before a private placement offer?
A prior Special Resolution approving the specific offer or invitation must be passed before the offer letter (Form PAS-4) is issued to prospective investors.
How many investors can a single private placement offer target?
Not more than 200 persons in aggregate per class of security in a financial year, excluding qualified institutional buyers and ESOP-scheme employees — exceeding this deems the offer a public issue.
What is the deadline for allotting securities after receiving application money?
60 days. If not allotted within that period, the money must be refunded within 15 days of that deadline, with 12% annual interest applying from the 60th day if the refund is also delayed.
What Registrar filings follow a private placement allotment?
Form PAS-3 (return of allotment) within 15 days of allotment, and separate filing of the offer letter details, with the list of offerees, within 30 days of circulating the offer letter.
References & Further Reading
This article references the following statutory provisions. Readers should always verify current rules, fees and timelines against the applicable statute and rules as amended, since these are revised from time to time.
- Companies Act, 2013, Section 42.
- Companies (Prospectus and Allotment of Securities) Rules, 2014, Rule 14, as amended.