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Private placement share allotment after funding, PAS-4 and PAS-3

  • After an investor agrees to fund you, the shares have to be issued in a strict legal sequence: valuation, board and shareholder approvals, a named offer letter, money into a separate bank account, allotment and the return of allotment.
  • Deadline: Allot within 60 days of receiving application money; PAS-3 within 15 days of allotment; MGT-14 within 30 days of each resolution; allotment within 12 months of the special resolution
  • Done in 10 to 15 working days from term sheet to allotment if valuation and documents are ready; PAS-3 within 15 days of allotment
  • Prepared by your Savvy, checked by a CA
  1. Signed term sheet or SSA
  2. Who exactly is investing
  3. Valuation by registered valuer
  4. MGT-14 SRNs and SH-7 SRN if filed
The law and the stepsPay and start · QuotePer round, + 18% GST

Answer in brief

After an investor agrees to fund you, the shares have to be issued in a strict legal sequence: valuation, board and shareholder approvals, a named offer letter, money into a separate bank account, allotment and the return of allotment. We run that sequence and file every form on time so the money can be used and the round is clean for the next investor.

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From the official sources

What the law says, and what trips people up

From the official portal's manuals and FAQs, with the source for each point.

The law

  • Companies Act 2013, Sec 42 and Rule 14(1), Companies (Prospectus and Allotment of Securities) Rules 2014

    Each private placement needs prior shareholder approval by special resolution with an explanatory statement (offer particulars, price and basis, valuer's name and address, amount, objects, material terms)Source

  • Rule 14(2) to 14(5)

    Offer to not more than 200 persons a year per class (ESOP holders and QIBs excluded); PAS-4 offer letter serially numbered to a named person within 30 days of recording names; record of offers in PAS-5; money only from the subscriber's own bank account; no renunciationSource

  • Companies Act 2013, Sec 42(4), 42(6) and 42(8)

    Money kept in a separate bank account and not used until allotment and return of allotment are done; allot within 60 days or refund within 15 days, else 12% interest; return of allotment (PAS-3) within 15 days of allotmentSource

  • Companies Act 2013, Sec 42(9)

    Default in filing the return of allotment: penalty of ₹1,000 per day on the company, promoters and directors, up to ₹25 lakhSource

  • Companies Act 2013, Sec 42(10)

    Contravention of Sec 42: penalty up to the amount raised or ₹2 crore, whichever is lower, on the company, promoters and directors, who may also have to refund the money with interestSource

  • Companies Act 2013, Sec 62(1)(c) and Rule 13, Companies (Share Capital and Debentures) Rules 2014

    Preferential issue of an unlisted company: authorised by AoA and special resolution, price not lower than a registered valuer's report, allotment within 12 months of the resolution, prescribed disclosures in the explanatory statementSource

  • Companies Act 2013, Sec 117(3) (MGT-14)

    Board resolution for issue of securities and the special resolution are filed with the ROC in MGT-14; offer letter issued only after filingSource

  • Government fee

    MCA filing fees for MGT-14, PAS-3 and, if capital is increased, SH-7 (plus fee on the increase) under the Companies (Registration Offices and Fees) Rules 2014; amounts not confirmed in this research. State stamp duty on share certificates applies separately.

  • Late fee or penalty

    PAS-3 after 15 days: penalty ₹1,000 per day up to ₹25 lakh under Sec 42(9) (https://indiacorplaw.in/?p=7001), plus MCA additional fees for late e-forms. Refund after the 75th day carries 12% interest from day 60 (https://treelife.in/legal/refund-of-application-monies-a-critical-aspect-of-corporate-governance).

On the portal

  1. Login to MCA V3 with the business user ID; associate DSCs of the signing director and professional
  2. If capital is increased: MCA Services > E-Filing > Company Forms > SH-7, attach resolution and altered MoA, pay fee
  3. File MGT-14 for the board resolution, then MGT-14 for the special resolution, each with certified copies and explanatory statement
  4. After allotment: file PAS-3 with the allottee list, board resolution and valuation report; certification by a practising professional where required
  5. Pay fees and save SRNs and challans; track approval under My Application
  6. For non-resident investors, file FC-GPR on RBI FIRMS within 30 days of allotment

What trips people up

  • Valuation report obtained after the board resolution

    Get it before the board approves the issue; it cannot be obtained retroactivelySource

  • Share money paid in cash or from a relative's or company's account

    Accept only banking channels from the subscriber's own accountSource

  • Money used before PAS-3 is filed

    Keep money in the separate account until allotment and PAS-3Source

  • Allotment delayed beyond 60 days after investor paid

    Refund within 15 days or pay 12% interest from day 60Source

  • Application from a person not named in PAS-4

    Offer only to named persons; such applications are invalidSource

  • New offer made before the previous allotment was completed

    Complete, withdraw or abandon the earlier offer firstSource

  • FC-GPR forgotten because MCA filings were done

    Sec 42 and FEMA are separate tracks; file FC-GPR within 30 daysSource

People ask

When can we start using the investor's money?

Only after allotment and filing of PAS-3.Source

How soon must we file the return of allotment?

Within 15 days of allotment.Source

What if we cannot allot within 60 days?

Refund within the next 15 days; after that, 12% interest from the 60th day.Source

Is a special resolution needed in a private company?

Yes, for each private placement and for a preferential issue under Sec 62(1)(c).Source

How many investors can we offer to?

Up to 200 persons a year for each class of security, excluding ESOP holders and QIBs.Source

What happens if we break Sec 42?

Penalty up to the amount raised or ₹2 crore, whichever is lower, and refund to investors.Source

IDFD

How we solve it: 4 steps

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Step 1 of 4 · What we need from you

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  • Signed term sheet or SSA
  • Registered valuer's report
  • Investor name, address, PAN, email
  • Investor bank account details
  • Current AoA and authorised capital
  • Investor consent letters
  • Separate bank account for share money
  • DSCs of director and CS or professional
  • FIRC, KYC and fair value certificateOptional

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Per round. Delivered in 10 to 15 working days from term sheet to allotment if valuation and documents are ready; PAS-3 within 15 days of allotment. Due: Allot within 60 days of receiving application money; PAS-3 within 15 days of allotment; MGT-14 within 30 days of each resolution; allotment within 12 months of the special resolution

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