Preferential Share Allotment on Private placement basis

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

20 August 2010 Hi All,

I run a start up and we want to raise money from market through private placement issuing preferrential share. Wanted to know the following
- Is a start-up allowed to raise money through such route
- Is there any approval required
- How one fixes the price
- What are the regulatory risk involved
-what happens if the company fails to make the payment of the share holders in the stipulated time.

Kindly edcuate me on this, I need the information urgently. Looking forward to help of this estemeed group. Thanks a lot in advance, regards

Ankur Garg

Ankur Garg (Expert)
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20 August 2010 Yes start-ups are allowed to follow the same route. Read section 81(1A). As per this section you have to collect approval of shareholders for preferential allotment through passing of special resolution in a general meeting.

However section 81 is not applicable to a private company. A private com. can issue shares simply by passing a board resolution.

After allotment you have to file form 2 with ROC to update paid up capital of the company.

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Ruchira Gupta

Ruchira Gupta (Expert)
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20 August 2010 There are a lot of formalities and procedures which need to be followed. In case you are interested, get in touch with me. I am a corporate lawyer specialising in capital markets regulations.

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