How laws related to private placement in The Companies Act, 2013 govern private companies?

This paper will explain the concept of the private placement and the law related to it in India. This paper will clearly state the procedure for a company to follow for the private placement of securities. Further, this paper will critically examine laws related to private placement in India and will also do a comparative analysis with law related to private placement in the US. This paper will conclude with a opinion of the author about the law related to private placement in India.

In a capitalist society and a growing economy, there is always a scarcity of funds to run a business. To maintain the flow of capital and to grow as a corporate structure it is necessary to raise capital. Initially, a company raises money from the original subscription but as business grow, they need more money and they do it by various means[1].

Section 23(2) of the Companies Act 2013 (referred to as the 2013 Act later), says that a private company may issue securities by way of rights issue or bonus issue following provisions of this Act; or (b) through private placement by complying with the provisions of part II of this chapter. Initially, private placements were governed by the Companies Act 1956, and the SEBI (Securities and Exchange Board of India) guidelines and regulations. However, there was a certain gap in these rules and regulations which were exploited by various companies and their promoters to indulge in unethical practices, thereby jeopardizing the interests of the shareholders.

The companies Act of 2013, made a lot of significant changes in the act and made rules governing private placement more stringent, transparent, and structured. This change in the law is done to safeguard the interest of the shareholders and curb down the malpractices undertaken by the promoters of the company. Explanation II (ii) of Section 42 of the 2013 Act defines private placement as 'any offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) through an issue of a private placement offer letter and which satisfies the conditions specified in this section[2].

Background
Section 42 of the 2013 Act has replaced the earlier provisions of the 1956, Act. The law on private placement in the 1956 Act did not require a private placement to be made to identified people. The earlier Companies Act 1956 did not define the term private placement, any invitation to offer or subscribe of debentures/ shares to any section of the public was regarded as private issues under section 67(3) of the 1956 Act.

People receiving the offer of these shares and debentures were treated like private individuals[3]. Initially, the rules related to private placement were only applicable to private companies but after the 2013, Act, both private and public companies are within the ambit of the Act[4]. Earlier the director of the company may allocate shares to any person of his or her choice without taking prior permission from the shareholders, however now it is mandatory to take the approval of the shareholders for allocation of securities.[5] Earlier the limit was restricted to 49 investors which have now been relaxed to 200 investors.

The law relating to private placement was amended after the landmark case of Sahara India real estate corporation limited v. Sebi[6]. In this case two Sahara group companies namely, Sahara India Real Estate Corporation Limited (SIRECL) and Sahara Housing Investment Corporation Limited (SHICL) raised capital by issuing optionally fully convertible debentures (OFCDs) as a private placement. The collected investment amounted to 24,000 crores which were received from more than 2 crores investors.

SEBI took cognizance of the fact that OFCDs were issued to a large number of investors from the public, and therefore issued a show-cause notice to the two companies. In the notice, SEBI stated that such an issue of OFCDs is a public issue and is liable to be listed under section 73 of the Act, 1956. SEBI also directed the companies to return the money so generated and mobilize through the prospectus issued concerning the OFCDs. The reason for such direction was that the two companies had violated various clauses of the SEBI (Disclosure and Investor Protection) Guidelines, 2000 and also various provisions of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009[7].

It was argued by the Sahara group that the issuance of such OFCDs was in nature of "hybrid instruments" as defined under section 2(19A) of the Companies Act, 1956 and SEBI was under no authority to regulate those securities since these securities does not come under the definition of 'securities' under the SEBI Act 1992, or the Securities Contract Regulation Act, ("SCRA")[8]. The appropriate law governing such issuance would be Section 55A (c) of the companies Act, 1956.

The Supreme court held that the issuance by the two company of the Sahara Group was a public issue of debentures. The threshold is the number of people as soon as more than 49 people are issued debentures it will result in public issue. The proviso to Section 67(3) becomes relevant and it is an issue to the public, which attracts Section 73(1) of the Companies Act, 1956. It further requires an application for listing which falls under the jurisdiction of the SEBI under section 55A(1)(b) of the ACT, 1956. Finally, the court upheld the proceedings of the SEBI and Sahara Group was ordered to return the amount collected from the investors along with interests.

Effect of Sahara Judgement
The judiciary in the case of Sahara evolved the jurisprudence related to the subject matter of the issue of securities, which is a milestone in the corporate landscape. This judgement may be regarded as a continuation of the series of socialist interpretation of the law. It is essential to note that the investors in the Sahara company mainly comprised of people from lower strata of society and barely earned enough to keep their body and soul together[9].

The company tried to take advantage of the poor knowledge of their investors related to technical securities such as OFCDs and tried to gamble with money of such investors who did not know about such securities[10]. Such investors were unaware of the risk which comes along with such schemes and they invest all their money on false hopes given by the directors of such company. In such a case the judiciary not only upheld the sanctity of the SEBI's absolute power to investigate matter related to listed companies but also extended its power to non-listed companies[11].

It extended great power to SEBI to investigate matters which directly and specifically deals with the interests of the investors. It clarified the law relating to the issuance of securities and removed the lacuna in the law which was exploited by the unlisted companies. Also, it has clarified the tussle of jurisdiction between the SEBI and MCA. Further, it is hoped that in future this judgement is instrumental in removing the differences between the SEBI and the MCA concerning jurisdiction and will provide a precedent that harmoniously constructs concurrent jurisdiction to safeguard the interest of the investors'[12]. This judgement is looked upon as relief as in past many corporate structures have misused this gap in the law and the rights of investors have been jeopardized.

While Sahara was a high-profile case it is not exclusive of such instances, where corporate structures have misused the lacunae in the law relating to private placement for their benefit and putting the rights of shareholders in jeopardy. Companies took advantage of the unclear division of jurisdiction between the ministry of Corporate Affairs (MCA) and SEBI to make multiple private placements. The new 2013, Act has made this law stricter and more transparent and strives to safeguard the stakes of the shareholders. It also mandates under section 42(4), a company to follow the provisions laid down under the securities and exchange board of India Act and Securities Contract Regulation Act (SCRA).[13]

Relevance of section 23(2) of the Companies Act, 2013.
Section 23(2) reads as a private company may issue securities: (a) by way of rights issue or bonus shares following the provisions of this Act; or (b) through private placement by complying with the provisions of Part II of this chapter[14]. Considering the above section, it is important to highlight that the language of the section uses the word �may� to issue securities.

The issue here is whether the word 'may be read as 'shall' in this section. Such construction will imply that to issue securities the private company then compulsorily have to comply with section 23(2) of the Companies act. The result of this construction will be that section 23(2) of 2013, Companies Act will be the stem provision and all other sections to issue securities in the Act will be its branches[15]. Thus, there exists this lack of clarity in this section whether the word 'may have to be interpreted literally or as 'shall'. Therefore, judicial interpretation of such a section becomes relevant.

In the case of Sarla Goel and others v. Kishan Chand[16], the honourable Supreme Court stated that:
it is a well-settled principle whether the word 'may' shall be used as 'shall', would depend upon the intention of the legislature.
Therefore, it is necessary to trace the history of section 23.

The companies bill 2009, did not contain provisions similar to section 23 of 2013, Act. However, clause 23 of the 2011 companies bill stipulated that a public company may issue securities through public offer, private placement, rights offer or bonus issue. There was no change to this language in the 2013 Act.

However, there was a significant difference in the language of clause 23(2) of the 2011 bill and section 23(2) of 2013, Act. Clause 23(2) of the 2011 bill said that a private company may issue securities only through private placement by complying with the provisions of part II of this chapter. The use of the word only in the section did not align with clause 62 and 63 which allowed for other methods of raising capital by way of rights issue or bonus issue.

The 57th report suggested that the word 'only' be replaced by 'also' so that it can be made consistent with clause 62 and 63 of the 2011 Bill (currently section 62 and 63 of 2013, Act) and capital can be raised through a rights issue and bonus issue also. Incorporating the suggestion of the 57th report, the Companies Bill 2012 added the words rights issue and bonus issue as other kinds of issuances.

The legislation did not add the word 'also' but deleted the word 'only' from clause 23(2). The change to section 23(2) of the 2013 Act suggests that the use of the word 'may' is meant to be mandatory in nature and issuance of securities have to be done while complying with the section. If the word 'may' in the section is to be considered as it is then the effect of the section is not much. A private company then has the discretion to follow or not follow the section while issuing its securities. In such a scenario it makes section 23 redundant.

On the other hand, if May is to be read as shall, it makes mandatory for a company to follow section 23(2). And all the other provisions will automatically be tied to either private placement or rights issue process. However, there is no specific provision in the 2013 Act which states that all issuances have to comply with section 23(2) and the same has left to interpretation[17]. Therefore, it can be argued that to raise capital through private placement a private company has to comply with 23(2) b of 2013, Act.

Procedure of private placement is governed by the following

• Section 42 of the companies Act 2013, offer or invitation for subscription of securities on private placement.
• Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.

Analysis of Section 42:

1. Offer Letter - States that a company may do private placement by issuing an offer letter, but such an offer letter will be issued with regards to the conditions stipulated in this section.[18]
2. Limit to the number of people to whom securities can be issued - It provides for the number of people to whom the securities can be issued or offer to issue securities can be given.

Such a number is not exceeding 50 individuals. however, the number fifty does not include qualified institution buyers and employees of the company to whom securities are offered under a scheme of employees' stock option as per provisions of clause (b) of sub-section (1) of section 62[19].

Explanation I: Defines what is a public offer. It says that when the company whether listed or not offers securities or invitation to subscribe securities exceeds the prescribed number of individuals, whether payment for such securities has been received or not, further it says that irrespective of the fact that whether the company intends to get itself listed in any stock exchange whether local or foreign, such issue of securities will be deemed to be a public offer.

Explanation II: defines the meaning of private placement and qualified institutional buyers.

1. Qualified institutional buyers will be persons who are identified under the Securities and Exchange Board of India (issue of capital and disclosure of requirements) Regulation 2009.
2. Defines private placement as an issue of securities to a selected group of individuals by a company (other than the way of public offer) via an issue of offer letter satisfying the conditions given in this section.
3. When can a new offer to securities can be an issue- It says to issue a new offer or new invitation to offer securities the pre-existing or already present offer or invitation to offer must be completed or withdrawn by the company[20].
4. Effect of non-compliance with this section- This subsection explicitly says that if any offer or invitation to offer is not in compliance with this section it shall be deemed to be a public offer. And such offer and invitation to offer will be governed by other provisions of this Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992[21].
5. Mandatory use of banking channels-This makes use of banking channels mandatory it says that all monies payable towards securities shall be collected by demand draft, cheque or other banking channels. This section will particular be useful to prevent launder of money[22].
6. Time limit - It stipulates a time limit to allocate securities and further stipulates a time limit to return the application money if securities are not allotted by the company. The company upon receiving the application money has a period of sixty days to allocate securities. Failing to do so they have fifteen days to return the application money. If the company failed to return the application money within fifteen days, they are liable to pay the application money along with an interest rate of twelve per cent per annum from the expiry of sixteen days.
   Provision to this sub-section says that all the monies received for the application shall be kept in separate bank accounts in a scheduled bank. Further, these monies will not be utilised for any purpose other than adjustment against allotment of securities or for the repayment of the application money where a company is not able to allocate securities[23].
7. Requirement of personal details to whom offers to subscription is made-Offers covered under section 42 will be made to persons whose names already recorded by the company before such invitation to offer or offer to subscription of securities. Such an offer will be made to individuals by name, the company will maintain a proper record as to whom the offer is made. Further, complete information about the offer will be filed with the registrar within thirty days of circulation of a relevant private placement offer letter[24]
8. Advertisement and other methods of promotion -Means of advertisement and promotion will not be utilised by any company while making private placement offer to inform the public at large[25].
9. Return with Registrar- It makes mandatory for a company to file a return of allotment of securities in a manner which is prescribed by relevant law, it shall further include the complete list of security holders along with their full names, addresses, number of securities allotted, and any other relevant information as may be prescribed[26].
10. Punitive nature of the section -This is a punitive sub-section which states if a company allocates securities in contravention of this section, its promoters and directors shall be liable for a penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is higher, and the company shall also return the monies to subscribers within a period of thirty days of the order imposing the penalty[27] .

Analyses of Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
1(a). Says that for purpose of private placement offer letter as enumerated in section 42(1), the company has to comply with Form Pas-4[28]
1(b). Provides for the offer letter to be sent along with the application form to the specified persons either in written form or in electronic mode, within the period of thirty days of recording the names of specified persons following sub-section 7 of section 42. Further, it says that no person other than the specified person to whom the offer letter is given will be allowed to apply for securities and will be invalid[29].

2(a). States that a company shall not make private placement unless such private placement is approved by the shareholders of the company, by a special resolution for each of the offers or invitations[30].

2(b). Offer or invitation of private persons shall not be made to more than two hundred people in aggregate in a financial year and not more than four such offer shall be made in a financial year. It provides that to calculate the limit of two hundred individuals it shall not consider offers made to qualified institutional buyers or employees of the company under a scheme of employee's stock option[31].

2(d). The payment for subscriptions of such securities will be made from the bank account of the specified persons and the company will keep a formal record of such bank transactions[32].

3. A record to be maintained by the company in separate form PAS-5 of a private placement.
Provision- stipulates a condition that a photocopy such record in sub-rule 3 and along with the private placement offer letter in Form Pas-4 will be filed with the registrar with the fee as prescribed by Companies (Registration offices and fees) Rules,2014, and where the company is listed with securities and exchange board within thirty days of circulation of private placement[33].

4. Return of securities as contemplated in subsection 9 of section 42 of 2013, Act to be filed with the registrar within a period of thirty days in Form PAS-3 along with the fee as per Companies (Registration Offices and Fees) Rules, 2014[34].

Along with details of security holders:

1. Full name, address, PAN and E-mail ID of such security holder
2. The class of security held
3. The date of allotment.
4. The number of securities held, nominal values and amount paid on such securities; and particulars of the consideration received if the securities were issued for consideration other than cash.

Salient features of rule 14 and procedure to be followed:

1. Offers to be made to specified persons: all offers of the private placement are mandatorily made to the persons who are identified by the company before the invitation to offer and such person shall receive their offer by name at their specified addresses
2. Form PAS-4: the private placement offer letter has to be made in consonance with the form PAS -4. The letter shall include information about the company, management perception of risk factors, disclosures on directors, cases on the company or directors if any, etc. It shall contain a complete description of the offer, the type of securities, the timeline to comply with, capital to be raised, the object of such issue and the vision of the company. It shall even contain the financial position of the company, the performance of the company in previous years, profits, capital structure, dividends etc.
3. Special Resolution: approval of shareholders is made mandatory by way of a special resolution by way of an offer or invitation to offer. There shall be an explanatory statement attached to the notice to the general meeting which will include the justification of the price of the offering. In case of non-convertible debentures, approval of shareholders is sufficient by a special resolution only once a year.
4. Circulation of the offer letter along with the application shall be done to the specified persons and shall be sent in the written and electronic form to their specified address. Only those persons will be eligible to apply for shares who have been personally given an invitation to offer or subscribe.
5. It has become mandatory for a company to maintain and prepare records under form PAS-5 of the offer made under form PAS-4 of a private placement. The details shall include the name of the specified persons, his/her father's name, contact details, address etc.
6. Filling of PAS-4 and PAS-5 has become mandatory for the company under the act and rules to file with the Registrar of Companies within 30 days. In the case of a listed company, it shall be further filed with SEBI.
7. Board Meeting and Allotment of securities: the company shall call for a board meeting to allocate securities to the specified persons and make allotment under private placements. The period for such allotment is given to be 60 days from the date of receipt of application money for such privately placed securities. However, if a company fails to allocate within the said period of sixty days it shall repay the application money within 50 days from the period started after completion of 60 days. If further the company fails to repay the application at the end of 15 days, it shall be liable to repay the original application money with an interest of 12% per annum from the expiry of the 60 days.
8. The company is required to file form PAS-3 to the registrar of the company a return of allotment giving complete particulars of the list of allotted- full names, address, PAN, class of security, date of becoming a security holder, number of securities, nominal value of the securities, the amount paid up and consideration received.
9. Issuance of security certificates when the procedure is completed the company shall move forward and issue the different security certificates which are allocated to respective persons.

Private Placement Market
The method of private placement has been utilised preferentially by both public and private companies to raise capital. In India private placement has gain importance due to prolong subdued condition in the new issues market. While equity market is governed by shares while the debt market is governed by bonds and debentures. Due to political and economic reasons equity market remains stagnant private placement of bonds and debentures have become popular. Some data to illustrate the market. The following diagram shows an increase in the issuance of securities in financial years[35].

The following diagram shows the increment in raising of capital via private placement. Firms in the financial year 2016 raised rupees 4.6 lakh crores through private placement of corporate bonds. According to the data available with SEBI, firms raised Rs. 4,58,073 crore last fiscal, which ended on 31st March.

This showcased a surge of 13 per cent over the preceding fiscal year[36]. In the year 2015, firms raked up Rs. 4,04136 crores via private placement. In terms of issuance in the 2016 financial year, 2,975 issuances were done as compared to 2,611 in 2014-2015. In the financial year 2017, Indian companies have raised worth of 6.41 lakh crores via private placement of corporate bonds to meet their growing business needs.

This witnessed a surge of 40 per cent from the previous year[37]. In Debt private placements firms issue securities or bonds to institutional investors to raise capital. This was the highest ever fundraising by the companies since the financial year 2001-2002. In terms of issuance 3,377 issues were made in the financial year 2016-2017 when compared to 2,975 in the financial year 2015-201643. Thus, this shows that private placement in India is growing and is preferred by both private and public companies.

Instances of Private placement in contemporary times:

1. HDFC to raise rupees 35,000 crores via private placement of non-convertible debentures. HDFC Bank said that the directors have granted its approval for the issue of secured (NCDs) raising rupees 35,000 crores[38][39
2. Indiabulls Housing Fin to raise Rupees 1,000 crores. This will be done by issuance of non-convertible redeemable bonds on a private placement basis. The face value of these debentures will be rupees 10 lakh each aggregating rupees 1000 crores on a private placement basis. The decision came after the meeting in September last year in which a special resolution was passed[40]. The issue will be open for subscription from 8th august,
   2016. 'It will carry coupon rates of 8.65-8.80% and the tenure of maturity is of 19 months/ 2 years/ 3 years[41]. The proceeds will be utilised by the company to meet up capital requirements, funding requirements, general corporate purposes and investment in funds.
3. NHPC to raise Rupees 2,250 crores through bonds. State-owned NHPC to raise capital via corporate bonds on a private placement basis. The approval came after the directors passed of such issuance in their general annual meeting[42]. During the financial year, NHPC is aiming to establish a new 330 MW Kishanganga project in Jammu and Kashmir. 100 MW is likely to be added from other wind and solar projects respectively.
4. Indian hotels raise Rupees 495 crores through non-convertible Debentures on a private placement basis[43].
5. IDBI Bank raises Rupees 1,000 crores through private placement of basil-III compliant bonds[44
6. Jubilant life sciences raise Rupees 495 crores through securities. The company has raised the capital aggregating to 495 crores on a private placement basis[45]
7. Bank of Maharashtra raises Rupees 500 crores via Basel-III bonds on a private placement basis[46].
8. Great Eastern Shipping Company (GESC) raised Rupees 400 crore via issuance of nonconvertible debentures by way of private placement[47].
9. Critical analyses of law related to private placement in India

Private placements allow various advantages over initial public offering to small and medium scale enterprises. Since private placement do not require the assistance of underwriters and brokers, they are less time-consuming and less expensive[48]. Private placement may be useful in business formats that are riskier and for which new investors are hard to find.

Even for a start-up firm that does not have the confidence of investors private placement is a useful mechanism to expand the business and fulfil the ever-increasing demand for capital. Another advantage of the private placement is that it allows the company discretion to choose investors. A company may pick investors based on similar goals and interests. This may be advantageous for the future of the company. Since investors are probably sophisticated businessperson it can enable a company to channel more complex and confidential transactions. Further, if the investors are entrepreneurs, they may assist the company with their valuable skill and assistance to the company's management[49].

And unlike public offerings, private placements enable small business to maintain their private status[50]. It provides for flexibility in the amount raised and type of funding. Private placements may allow investments to be done for a longer period and thereby create more return on investment as investors in a private placement are more patient as compared to other investors such as venture capitalist57. It is also a fast way to raise capital as compared to venture market or public placements.

However, it is also essential to note that suitable investors may be difficult to find and may have limited capital to invest[51]. Further private placed securities are given up at a greater discount and below market prices. It is further difficult to arrange private placements offerings in multiple stages. In light of section 42 of the 2013, Act it can be further argued that the procedure for a private placement of securities is very tedious and hard to follow. The stringent laws to be complied with discourages companies to raise capital while using such a method.

Comparative Analysis with the United States
In the United States of America, the law related to private placement is governed by section 4(2) of federal securities law, and Regulation D of Securities and Exchange Commission rules which were adopted in 1982. Private placement in the U.S. is treated as an exemption from provisions of section 5 of the Securities Act which provides for 'transactions by an issuer not involving any public offering'[52].

Private placement in U.S. means �A securities offering exempt from registration with the SEC is private placement�[53]. Under the law of United States, a company can only issue or sell securities when it is either registered with SEC or an exemption from registration is available, private placement is one such exemption.

Section 4 (2) provides for a company to raise capital through private placement. An exemption is carved out by this section for the companies trying to raise $5 million in securities to a small number of accredited investors[54]. One condition for the application of this section is that such offering cannot be done to investors publicly, the investors, in this case, are expected to be persons who are either insiders or sophisticated outsiders.

By insiders, it means people who are part of the management of the company and by sophisticated outsiders, it means people who directly connected to the company and has a pre-existing relationship with the company[55]. While doing a private placement a company is required to fulfil certain conditions. Firstly, they are expected to provide their potential investors with recent financial statements. Secondly, all the risk factors associated with the investment. And thirdly, an invitation to inspect their facilities. However, this section 4(2) of the securities act has been termed Section 4(a)(2) by the JOBS Act[56].

Regulation D under the Securities Act provides further exemptions for private placement. It allows a company to offer and sell its securities without having to register these securities with SEC[57]. Companies that issue securities by using the mechanism mentioned in Regulation D have to file a 'Form D' in electronic mode with the SEC after they first sell their securities65. Form D includes the names and addresses of the promoters and directors of the company. However, it does not contain much information about the offering but contains little information about the company. Regulation D contains three SEC rules which are rules 504, 505 and 506.
Rule 504
This rule allows issuers to sell and offer securities up to $1 million in any 12 months. There is no limit as to how many people these securities can be sold and there is no requirement of any specific type of investor. Also, the issuer is under no obligation to specific disclosure requirements[58].
Rule 505
Under this rule, the limit to issue securities is extended up to $5 million in any period of 12month[59]. These securities can be issued to certain types of investors. These securities can be issued to any number of accredited investors but not more than 35 non-accredited investors. If the issuer of the securities sells them to non-accredited investors they must disclose information about themselves, including financial statements. However, no such information is required in case the sale is made to accredited investors.

An individual may be considered an accredited investor if:

• Earned income is more than $200,000 or $300,000 together with the spouse in each of the prior two years, or,
• Has a net worth of more than $1 million either alone or cumulative with the spouse. For this net worth value of a person's residence and any loans will not be considered.

Rule 506
An unlimited amount of securities can be issued by this rule. As per 506(b) any amount of securities can be issued to the accredited investor but not more than 35 non-accredited investors. Also, to issue securities to non-accredited investors a necessary condition is that they must be sophisticated investors. These investors should have sufficient knowledge and experience in financial and business matters to evaluate the investment. Also, with nonaccredited investors, an issuer is under obligation to issue information about itself and the company to the investors along with a financial statement as required in rule 50568.

In the light of the above law, we see a lot of difference in law related to a private placement in India and the United States of America. In India private placement is not taken as an exemption to raise capital by companies and is itself codified in the Companies Act. It can be said that in India private placement is like another method to raise capital by selling by the company. However, in the USA it is treated as an exemption to the general rule.

Law related to a private placement in India is more comprehensive and extensive with procedure for it given by SEBI as well as Companies Act 2013, in the USA it can be seen there is no extensive procedure but only a few conditions to be met for private placement. Private placement in India is done to specific people and not more than 200 in a year. But in the USA it is not limited to specific people but to a specific type of investors who are distinguished as accredited and non-accredited investors.

It can be said that rules related to the private placement are stricter in India than in the USA. Since people in India are largely not so sophisticated in dealing with securities it is essential to form such stringent rules so that their rights can be safeguarded. As far as people in the USA is concerned, they are better aware of the securities market due to it being a developed nation. And this can be a difference in law related to the same topic between a developed country and a developing country.

In countries like India, strong government intervention is required to safeguard the rights of poor people but in developed countries like America, the securities market is governed by people ability and individual net worth.

Conclusion
From the analyses, it is clear that after the Sahara case the law related to private placement is more transparent, stringent and watertight. The Sahara judgement is looked upon as an achievement in corporate landscape. It upheld the rights of investors and safeguarded them against companies that exploited the gap in the law to gamble upon the future of the poor investors. Thereafter, Government has taken some positive steps to curb down the malpractices which were undertaken by corporate structure.

After passing of the 2013, Act it can be said that the interests of the shareholders have been safeguarded. Section 42(10) which provides for punishment, if law related to private placement have not been complied is a positive step taken by the legislature. On the other hand, it can also be argued that since the requirements for raising capital through private placement have become more stringent the whole purpose of the private placement is shattered as it was meant to be a faster and easier route to raise capital by the companies.

Such a change in rules may significantly increase the burden on private companies looking to raise capital via private placement. It is also important to note that there is no exemption given to private companies or small-scale companies which will result in reduced flexibility to private companies and companies which are run by a close group of persons.

In my opinion, I feel that it is essential to have a transparent, comprehensive, and strict law when the government is dealing with corporate structures. Since the common public is not aware of the underlying technicalities of law and various other aspects related to the company and different kind of securities. Strict scrutiny of any offer made by any company must be taken place.

The procedure for private placement may be rigorous however it is necessary to be followed and the corporate structures have the means and knowledge to follow them. Further, if such laws are not followed rights of the various investor will be jeopardized and the purpose of the law will be defeated. As it is essential that law should not be against public policy and should be based on the principle of justice, fairness, and equality.

End-Notes:
[1] 42 Of Companies Act, 2013 � Offer Or Invitation For Subscription Of Securities On Private Placement' (Corporate Law Reporter, 2021) http://corporatelawreporter.com/companies_act/section-42-of-companies-act-2013-offer-or-invitation-for-subscription-of-securities-on-private-placement/#:~:text=%E2%80%94%E2%80%9Dprivate%20placement%E2%80%9D%20means%20any,conditions%20specified%20in%20this%20section. accessed 3 May 2021.
[2] The companies Act 2013, s42(ii)
[3] Private Placement Under Companies Act, 2013 - Corporate/Commercial Law - India
accessed May 3, 2021.
[4] Private Placement of Shares (Law Farm) accessed May 3, 2021
[5] Ibid.
[6] (2012) 115 SCL 478
[7] Private Placement of Securities � An Overview (Vivro Financial Services: Credit syndication, debt syndication, merchant banking services in Mumbai, Chennai, Pune, Surat, Vadodara, Ahmedabad) accessed May 3, 2021
[8] Ibid.
[9] Post G, CRITICAL ANALYSIS OF SAHARA CASE (I Pleaders January 2, 2016) accessed May 3, 2021
[10] ibid
[11] Sahara vs. SEBI-An In-Depth Analysis of The Landmark Supreme Court Ruling - Corporate/Commercial
Law - India) accessed May 3, 2021
[12] ibid
[13] Supra Note (1)
[14] The Companies Act 2017, s. 23(2)
[15] India Companies Act, 2013- Section 23 What May Be - Corporate/Commercial Law - India, accessed May 3, 2021.
[16] (1997) 9 SCC 132
[17] ibid
[18] The Companies Act 2013, s42(1)
[19] The Companies Act 2013, s42(2)
[20] The Companies Act 2013, s42(3)
[21] The Companies Act 2013, s42(4)
[22] The Companies Act 2013, s42(5)
[23] The Companies Act 2013, s42(6)
[24] The Companies Act 2013, s42(7)
[25] The Companies Act 2013, s42(8)
[26] The Companies Act 2013, s42(9)
[27] The Companies Act 2013, s42(10)
[28] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(1)a
[29] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(1)b
[30] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(2)a
[31] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(2)b
[32] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(2)d
[33] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(3)
[34] Share Capital and Debentures Companies (Prospectus and Allotment of Securities) Rules, 2014, rule 14(4)
[35] Supra n (9)
[36] Firms Raise Record Rs 4.6 Lakh Cr via Debt Placement in FY16 (Moneycontrol)
accessed: September 23, 2018
[37] PTI, India Inc Raises Rs 6.41 Lakh Cr via Debt Placement in FY17 (@businessline January 11, 2018) accessed: September 23, 2018
[38] HDFC Plans to Raise Rs 35,000 Cr via NCDs (Money control)

[39] .html> accessed September 23, 2018
[40] India bulls Housing Fin to Raise Rs 1,000 Cr for Funding Needs (Money control)
accessed: September 23, 2018
[41] ibid
[42] NHPC to Raise Rs 2,250 Crore via Bonds (Money control)
accessed September 23, 2018.
[43] Indian Hotels Raises Rs 495 Cr via NCDs (Money control)
accessed September 23, 2018
[44] IDBI Bank Raises Rs 1,000 Cr via Bonds (Money control)
accessed September 23, 2018
[45] Jubilant Life Sciences Raises Rs 495 Cr via Securities (Money control)
accessed September 23, 2018
[46] Bank of Maharashtra Raises Rs 500 Cr via Basel-III Bonds (Money control)
accessed September 23, 2018
[47] GE Shipping Raises Rs 400 Crore by NCDs (Money control)
accessed September 23, 2018
[48] Private Placement of Securities - Encyclopaedia - Business Terms (Inc.com November 30, 1899)
< https://www.inc.com/encyclopedia/private-placement-of-securities.html > accessed September 23, 2018
[49] ibid
[50] ibid 57 Migrator, Advantages and Disadvantages of Raising Finance through Private Placements (nibusinessinfo.co.uk March 22, 2018) accessed September 23, 2018
[51] Supra n (53)
[52] Practical Law (Practical Law US Sign on)
accessed May 3, 2021
[53] Investor Bulletin: Private Placements Under Regulation D (SEC Emblem September 24, 2014)
accessed May 3, 2021
[54] Private Placement of Securities - Encyclopaedia - Business Terms (Inc.com)
accessed May 3, 2021
[55] Ibid.
[56] Supra(n59).
[57] Regulation D Offerings (SEC Emblem December 2, 2009) accessed May 3, 2021.
[58] Ibid.
[59] Supra n (59). Supra n (59).

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