Explain private placement method for the issue of shares.

1.	Explain private placement method for the issue of shares.
Answer» When a company offers its securities to a select group of persons not exceeding 200, it is called a private placement. In private placement, the company offers its securities only to identified person and not to the general public. Statement in lieu of prospectus should be filed by the company with ROC before making a private placement. The Board of directors selects or identify the persons to be included in the select group. They can be mutual funds, Institutional Investors etc. Company has to issue private placement offer letter along with the application. The shares offered can be fully or partly paid up and the consideration should be paid by cheque, Demand Draft, etc. but not by cash. Right to renunciation is not given to applicants under private placement. The company has to get approval of shareholders through a special resolution. A company can make private placement through a rights issue and preferential allotment.

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