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Right Issue vs. Private Placement vs. Preferential Allotment Under Companies Act, 2013
CS Shivani Gupta | Updated : 01st April 2022
S. No. | Basis of Difference | Right Issue | Private Placement | Preferential Allotment |
1. | Applicable Provisions Under Companies Act, 2013 | Sec 62(1)(a) read with rules | Section 42 read with rule 14 companies (Prospectus and allotment of securities) Rules, 2014 | Sec 62(1)(c) read with rules 13 of Companies (share capital and debentures) Rules, 2014 and Section 42 read with rule 14 companies (Prospectus and allotment of securities) Rules, 2014 |
2. | Security issued | Equity Shares and Preference Shares | Equity Shares, Preference Shares and Debentures | Equity Shares and Preference Shares |
3. | Person to whom the offer is made | Shares to be issued to existing Equity Shareholders in proportion to their existing shareholding. | Shares to be offered to investors or any selected group of people or any outsider (other than by way of public offer)
Can invite 50 people (max) at one time. Can be offered to 200 people (max) in a year | Shares can be issued to both, the existing shareholders as well as outsiders. |
4. | Offer Period | Minimum Period- 15 days Maximum Period- 30 days (however in case of private company if consent from 90% of the shareholder then the offer period can be less then as defined above) | Minimum Period – No specific period defined. Maximum period – 365 days. | Minimum Period – No specific period defined. Maximum period – 365 days. |
5. | Approval Required | Board Approval | Board & Shareholder approval | Board & Shareholder approval |
6. | Format of offer letter | No specific format | PAS-4 (offer letter) PAS-5 (Complete record) | PAS-4 (offer letter) PAS-5 (Complete record) *No such format in case of offer only to existing members. |
7. | Forms to be filed | E-Form PAS-3 is required to be filed within 30 days of passing of Board resolution for the allotment of shares. | 1. E-Form MGT-14 is required to be filed within 30 days of passing of Special Resolution in general meeting.
2. E-Form PAS -3 to be filed within 15 days of allotment of shares | 1. E-Form MGT-14 is required to be filed within 30 days of passing of Special Resolution in general meeting.
2. E-Form PAS -3 to be filed within 15 days of allotment of shares |
8. | Time Frame for allotment of securities
| Within 60 days from the date of receipt of application money. | Within 60 days from the date of receipt of application money. | Within 60 days from the date of receipt of application money. |
9. | Renunciation Rights | Shareholders have the right to Renounce / accept / reject the offer letter. | No such rights | No such rights
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10. | Separate Bank Account | Not Required | Required | Required |
11. | Valuation Report | Not mandatory (Mandatory only in the case of issue of securities to non-resident shareholder) | Not mandatory | Mandatory |
12. | Mode of receipt of Subscription money | Can be received in cash or through banking channel | Can be received only through Banking channel | Can be received in cash or through banking channel |
