Relaxation in Relation to Private Placements to QIBs

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Dec 31, 2020

Relaxation in Relation to Private Placements to QIBs

The MCA has by way of a Notification dated October 16, 2020, amended the Companies (Prospectus and Allotment of Securities) Rules, 2014 (‘PAS Rules’). Rule 14(1) of the PAS Rules provides that for the purposes of Sections 42(2) and 42(3) of the Companies Act, a company will not make an offer or invitation to subscribe to securities through private placement unless the proposal has been previously approved by the shareholders of the company, by a special resolution for each of the offers or invitations. The MCA has now relaxed this requirement, with immediate effect, in relation to qualified institutional buyers (‘QIBs’) and provided that in relation to private placements to QIBs, it will be sufficient if the company passes a special resolution once a year for all the allotments to QIBs during the year.

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