By Manisha Shroff, Pranay Bagdi, Oishik Bagchi, Oindrila Bhowmik
On 7 August 2018, the Central Government has issued a notification bringing into force the provisions of Section 10 of the Companies (Amendment) Act, 2017 amending Section 42 of the Companies Act, 2013 (Act) relating to private placement norms for issue of securities. Further, consequential amendments required to the Companies (Prospectus and Allotment of Securities) Rules, 2014, as amended (PAS Rules) pursuant to Companies (Prospectus and Allotment of Securities) Second Amendment Rules, 2018 have also been notified.
The Report of the Company Law Committee (CLC) issued in February 2016 recommended changes to private placement norms to simplify the processes, avoid duplication of disclosures, lessen regulatory interference and ensure greater self regulation. This led to amendment of Section 42 of the Act. Although the procedural requirements have been simplified, disclosure requirements have been enhanced significantly, but penalty for violation of norms of private placement has been significantly reduced.
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