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Comparison of Right, Private and Preferential Issue

S. No. Point of Differences Right Issue

(Equity Shares& Preference Shares)

 Private Placement

(Securities)

 Preferential issue

(Securities)
1. Definition When issue of equity/preferenceshares is made by an issuer to its existing equity shareholders in a ratio to the number of shares held as on the date of Board Meeting it is called a right issue. When an issuer makes an issue of securities to a selected group of persons not exceeding 200(excluding QIBs and employees of the company) in a financial year. When an issuer makes an issue of Securities to a selected group of persons not exceeding 200 whether including or not QIBs and employees of the company) either for cash or for a consideration other than cash.
2. Type of shares Equity and Preference Shares Securities Securities
3. Section 62(1)(a) 42 42, 62(1)(c)
4. Resolution Board Resolution Special resolution Ordinary Resolution for private companies and Special resolution for other than private companies
5. Forms required to be filed 1.       PAS-3-Return of Allotment

 

 1.    PAS-4-Private Placement Offer Letter

2.    PAS-5-Record of private placement offers and

3.    MGT-14 for filing SR

4.    PAS-3-Return of Allotment

 1.    PAS-4-Private Placement Offer Letter

2.    PAS-5-Record of private placement offers

3.     MGT-14 for filing SR

4.    PAS-3-Return of Allotment
6. Persons to whom allotment to be made To existing equity shareholders To such security holders whose names are recorded by the company (as decided by the board) prior to the invitation to subscribe.

 

 Such shares may be offered to any persons, if it is authorized by a special resolution, either for cash or for a consideration other than cash, if the price of such shares is determined by the valuation report of a registered valuer subject to such conditions as may be prescribed [Section 62(c) of the Companies Act, 2013].
7. Documents required 1.     Right Issue Offer Letter,

2.     List of allottees with their full names, addresses, PAN and Email ID, number of securities allotted, class of security, date of allotment.

3.    Application form serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him

 

 

 1.PAS-4-Private Placement Offer Letter and

2. Application form serially numbered and addressed specifically to the person to whom the offer is made and shall be sent to him, either in writing, within 30 days of recording the names of such persons.

3. PAS-5-Record of private placement offers

4. List of allottees with their full names, addresses, PAN and Email ID, number of securities allotted, class of security, date of allotment

 

 1.    Issue of a private placement offer letter. (Sec 42(1)). For the purposes of sub-section (1) of Section 42, a company may make an offer or invitation to subscribe to securities through issue of a private placement offer letter in Form PAS-4.

2.    The company shall maintain a complete record of private placement offers in Form PAS-5.

3.    A copy of such record (PAS-5) along with the private placement offer letter in Form PAS-4 shall be filed with the Registrar within 30 days of circulation date. Date of private placement offer letter shall be considered as circulation date

 
8. Time limit for allotment Allotment shall be done within 60 days from the date of receipt of the application money and if company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the date of completion of sixty days and if the company fails to repay that money with interest at the rate of 12 % per annum from the expiry of 60th day.

 

 1. Allotment shall be done within 60 days from the date of receipt of the application money and if company is not able to allot the securities within that period, it shall repay the application money to the subscribers within fifteen days from the date of completion of sixty days and if the company fails to repay that money with interest at the rate of 12 % per annum from the expiry of 60th day.

 

 

 1.    A company making an offer of securities shall allot its securities within sixty days from the date of receipt of the application money for such securities. If not able to allot, return application money within 15 days failing which interest shall be payable by the company @ 12% p.a.

2. The payment to be made for subscription to securities shall be made from the bank account of the person subscribing to such securities and the company shall keep the record of the Bank account from where such payments for subscriptions have been received. (Rule 14(2)(d) of Companies (Prospectus and Allotment of Securities) Rules, 2014)

3. The securities allotted by way of preferential offer shall be made fully paid up at the time of their allotment.
9. Opening of Separate Bank Account Not required Money received on application shall be kept in a separate bank account  in a scheduled bank

 

 Monies received on application shall be kept in a separate bank account in a scheduled bank
10. Filing of return of allotment in Form PAS-3 Within 30 days of  allotment Within 30 days of  allotment

 

 Within 30 days of  allotment

(along with a copy of valuation report).
11. Terms and Conditions 1. In case of Private Company– If 90% of the members of a private company have given their consent in writing or in electronic mode the offer can be accepted within a time less than 15 days from the date of the offer (as per notification dated 05.06.2015).

 

2. In any other case-The offer shall be accepted within a time not less than 15 days and not exceeding 30 days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined.

 

3. The offer shall be deemed to include the right to renounce the shares in favour of any other person and the notice of offer shall contain a statement of this right

 

4. In case of Private Company- If 90% of the members of a private company have given their consent in writing or in electronic mode the notice shall be dispatched through registered post or speed post or through electronic mode to all the existing shareholders at any time before the opening of the issue.

5.In any other case–   The notice shall be dispatched through registered post or speed post or through electronic mode to all the existing shareholders at least three days before the opening of the issue.

 1.        SR for private placement for each of the offers.

2.        Basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed in the explanatory statement.

3.        Such offer shall be made to not more than two hundred persons in the aggregate in a financial year.

4.        Not less than Rs. 20,000 allotted to any person.

5.        No need to issue prospectus or any other public advertisement

6.        Received money payable on subscription of such securities through cheque or demand draft or other banking channelsbut not in cash.

7.        Made such offers only to the persons whose names were recorded by the company prior to such invitation and suchpersons have received such offer by name.

 1.        OR in case of private companies and SR in case of other than private companies for private placement for each of the offers.

2.        Basis or justification for the price (including premium, if any) at which the offer or invitation is being made shall be disclosed in the explanatory statement.

3.        Such offer shall be made to not more than two hundred persons in the aggregate in a financial year.

4.        Not less than Rs. 20,000 allotted to any person.

5.        No need to issue prospectus or any other public advertisement

6.        Received money payable on subscription of such securities through cheque or demand draft or other banking channelsbut not in cash.

7.        Made such offers only to the persons whose names were recorded by the company prior to such invitation and suchpersons have received such offer by name.
12. Renunciation It is possible It is not possible It is not possible
13. Valuation Report Not Required Required from a  registered valuer Required from a  registered valuer
14. Proportion Allotment shall be made in the same ratio to the number of shares held as on a particular date. Proportion may be more or less Proportion may be more or less

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