Whether it is a preferential allotment

This query is : Resolved

Priya Sharma (Querist)
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03 November 2009 A Public (Unlisted) Company is alloting shares to its shareholders without any premium at a face value of Rs. 10 per share.At the same time the Company is also alloting the shares to a Private Company at a premium of Rs. 10 per share and at a face value is Rs. 10 per share.

My query is whether the allotment of shares to this Private Co. at premium will amount to preferential allotment or not??

Plz guide me.

Regards

Priya Sharma

CS. Ashish Shah

CS. Ashish Shah (Expert)
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03 November 2009 Dear Ms. Priya,

you have not mentioned your full query.

1. Whether the shares has been allotted to all the shareholders or some of the shareholders.

2. the private limited company has allotted shares along with the allotment to other shareholders or altogether it is a different transaction then what has been described in 1 above.

If the shares has been allotted to all the shareholders including the pvt. ltd. in Rights Issue then it will not be a private placement.

If the shares has been allotted to some shareholders including pvt. ltd. then it will be private placement.

E.g. if the company has 100 shareholders and the company allotting shares to all the 100 shareholders then it is not the private placement and

if the Company is allotting shares to say 15 or 20 shareholders it will be private placement.

With Regards,

Ashish Shah
Company Secretary

RAJA KARTHIK S

RAJA KARTHIK S (Expert)
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03 November 2009 Dear Ms. Priya,

I assueme that the allotment is made in two trenches.

If the allotment is to all the existing shareholders in the same proportion then it is Rights issue and not preferential issue.

If allotment is to other than existing or including existing shareholders its preferential issue. For which unlisted public companies pref allotment rules also to be followed.

And finally regarding the pricing there are no restrictions for allotment to resident shareholders of unlisted companies.

If non-resident Fema regulations to be complied with as to procedures and pricing.

Regards,
Raja Karthik S.

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Ankur Garg

Ankur Garg (Expert)
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03 November 2009 From your query i understand there are 2 allotments involved.

For deciding whether an allotment is preferential or not issue on premium is not the criteria.

If you are allotting share to a person other then existing shareholder then it may be considered as pref allotment.

Also observe the time limits given u/s 81.