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Any private limited company registered in India can utilize private placement, provided:
• The company has not declared dividends in the past two years.
• The Articles of Association permit private placements.
• The total number of investors does not exceed 200 (excluding certain categories like Qualified Institutional Investors (QIPs) and Employee Stock Option Plans (ESOP)).
• The company complies with specific investment limits for certain investor categories as stipulated by the Companies Act, 2013.
Private placements offer distinct advantages for your company:
• Targeted Fundraising: Secure capital from pre-qualified investors aligned with your vision and goals, fostering strategic partnerships and gaining valuable expertise.
• Controlled Dilution: Limit shareholder base and maintain greater control over company operations compared to publicly listed companies.
• Faster and Cost-Effective: Streamlined process compared to public offerings, minimizing administrative costs and time to access capital.
• Flexibility and Customisation: Tailor investment terms and agreements to suit specific investor needs and company objectives.
Private placement follows a specific legal framework outlined by the Companies Act, 2013 and SEBI (Securities and Exchange Board of India) regulations. CAA guides you through every step, minimizing disruptions and ensuring legal compliance:
• Board Resolution: Convene a Board Meeting and pass a resolution proposing the private placement, specifying the amount of capital to be raised, investor eligibility criteria, and offer details.
• Investor Identification: Identify and qualify potential investors aligned with your company’s goals and funding requirements.
• Information Memorandum Drafting: Prepare a comprehensive Information Memorandum (IM) outlining the company’s financials, business plan, investment offer, and legal terms.
• Investor Meetings and Negotiations: Engage with potential investors, addressing their queries, and negotiating investment terms.
• Subscription Agreement and Allotment: Finalize the Subscription Agreement with selected investors and allot shares based on their commitments.
• Filing with ROC and SEBI: Comply with filing requirements with the Registrar of Companies (ROC) and SEBI, as applicable.
Ensure you have all necessary documents readily available to avoid delays:
• Copies of Board Resolutions
• Information Memorandum (IM)
• Shareholding pattern of the company
• Audited financial statements
• Business plan and future projections
• Copies of legal agreements with investors
• Payment challan for filing fees
• Additional documents may be required depending on the state, ROC, and SEBI regulations.
Fill the form or Chat with one of our executive to get all the details.
Submit all necessary documents required for company registration.
Get your work done in in 10-15 working days
Fill the form or Chat with one of our executive to get all the details.
Submit all necessary documents required for company registration.
Get your incorporation registered in 10-15 working days
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Private placement of shares refers to the issuance of shares to a select group of investors, excluding the general public, enabling the company to raise capital without conducting a public offering.
Reasons may include raising capital from strategic investors, expanding the shareholder base, avoiding regulatory requirements of public offerings, or facilitating business partnerships.
The procedure typically involves obtaining board approval, identifying potential investors, offering shares through a private placement offer letter, obtaining shareholders' approval, updating company records, and filing necessary forms with the RoC.
No, private placement is limited to certain categories of investors as per SEBI regulations, including qualified institutional buyers (QIBs), non-institutional investors, and others.
Yes, restrictions may include compliance with SEBI regulations, pricing guidelines, disclosure requirements, and restrictions on the number of investors and allotments, if applicable.
Both the company and investors may have tax liabilities depending on the investment amount, share price, and holding period. Consult a tax professional for specific advice.
Absolutely! CAA offers comprehensive support, from drafting the IM and legal agreements to investor identification, negotiations, and compliance with ROC and SEBI regulations.
Documents such as board resolution, private placement offer letter, PAS-4, PAS-5, and necessary forms for filing with the RoC are required.
The process must be completed within a specified timeline, as per the requirements of SEBI regulations and any applicable regulations.
Non-compliance may lead to legal challenges, rejection of the placement by regulatory authorities, penalties imposed by SEBI, and adverse impact on the company's compliance status and reputation.
Yes, Avenue Advisory provides expert assistance for conducting private placement of shares, including drafting of resolutions, preparation of documents, filing with the RoC, and compliance monitoring.
Avenue Advisory ensures compliance with the private placement of shares procedure by guiding clients through the process, preparing accurate documents, and liaising with the RoC for timely approvals.
Potential risks include finding suitable investors, negotiating favorable terms, and ensuring legal compliance. CAA's expertise helps mitigate these risks and maximize the success of your private placement.
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