Rule 1Short title and commencement
- Companies (Prospectus and Allotment of Securities) Rules, 2014.
- Operative from 1 April 2014.
Finin2minCompanies Act Rules Master Series 02
Prospectus, Private Placement
and Allotment of Securities
A professional rulebook covering public offers, offer for sale, shelf and red-herring prospectuses, allotment and refunds, prospectus liability, private placement, dematerialisation and permitted direct listing.
Rules 1-14
Including Rules 9A and 9B
Including Rules 9A and 9B
200 Persons
Per kind of security per FY
Per kind of security per FY
60 + 15 Days
Private allotment and refund
Private allotment and refund
15-Day PAS-3
Private-placement filing
Private-placement filing
Section, Rule, Form and company-class control
This page is integrated with the section index, Rules and MCA Forms repository, company-class matrix and transaction workflows. Current MCA/Gazette instruments and portal instruction kits control.
Executive architecture
Four systems inside one rulebook
Public offer
Prospectus/RHP/shelf, SEBI disclosure, exchange permission, demat, minimum subscription and liability.
OFS and tranches
Deemed prospectus, member offer for sale, shelf updates and PAS-2.
Private placement
Identified persons, special resolution, PAS-4/PAS-5, bank trail, allotment and PAS-3.
Demat/direct listing
Rules 9A/9B, PAS-6 and section 23(3) permitted-exchange framework.
First control: classify the investor approach before preparing the document. A public solicitation cannot become a valid private placement merely because PAS-4 is later issued.
Route map
Choose the legally permitted issue route
Act gateway
Sections 23-42 - operational register
| Section | Subject | Professional control |
|---|---|---|
| 23-24 | Permitted issue routes and SEBI jurisdiction | Public companies: public offer, private placement, rights/bonus and prescribed direct listing. Private companies: rights/bonus or private placement. |
| 25 | Deemed prospectus | Public resale after allotment can cause the sale document to be treated as the company's prospectus. |
| 26 | Prospectus disclosures | Dated and signed document, regulator-prescribed disclosures, expert consent, filing and statutory statement. |
| 27 | Variation of objects/contract | Special resolution, transparent notice and dissenting-holder exit framework when public money remains unutilised. |
| 28-30 | Member OFS, demat and advertisement | Company prospectus framework, mandatory demat for prescribed classes and advertisement consistency. |
| 31-33 | Shelf, RHP and application forms | One-year shelf validity; PAS-2 update; RHP at least three days before opening; application with abridged prospectus. |
| 34-38 | Liability and personation | Fraud, civil compensation, deceptive inducement, affected-person action, personation and disgorgement. |
| 39-40 | Allotment and exchange permission | Minimum subscription, application money, PAS-3, recognised-exchange permission and separate bank account. |
| 41 | Global depository receipt | Special resolution and prescribed foreign-issue framework. |
| 42 | Private placement | Identified persons, closed communication, banking trail, 60-day allotment, refund, PAS-3 and deemed-public-offer consequence. |
Current rule register
Companies (Prospectus and Allotment of Securities) Rules
Rule 2Definitions
- Defines Act, Annexure, fees, forms, Regional Director and section.
- Undefined expressions take their meaning from the Act and applicable definition rules.
Rule 3Omitted - former prospectus information
- Omitted from 7 May 2018.
- Current public-offer disclosure is governed by section 26 and applicable SEBI regulations.
Rule 4Omitted - former auditor reports
- Omitted from 7 May 2018.
- Do not use the historic report format as current law.
Rule 5Omitted - former additional matters and reports
- Omitted from 7 May 2018.
- Current offer documents follow the Act and regulator requirements.
Rule 6Omitted - former ancillary prospectus matters
- Omitted from 7 May 2018.
- Expert consent and liability continue under the Act and current securities framework.
Rule 7Variation in contract terms or objects
- Postal-ballot special resolution where unutilised public-issue money remains.
- Notice explains original and proposed objects, amounts used and unutilised, justification and risk factors.
- Publish PAS-1 simultaneously in English and vernacular newspapers and place it on the website.
Rule 8Offer of sale by members
- Prospectus framework applies with adaptations to an offer for sale.
- Disclose selling members, securities, consideration, issue expenses and allocation of those expenses.
Rule 9Dematerialisation and historic share warrants
- Promoter holdings in convertible securities must be dematerialised before a public offer.
- Historic pre-2014 share-warrant process uses PAS-7/PAS-8 and the 2023 IEPF transfer framework.
Rule 9AUnlisted public company dematerialisation
- Covered unlisted public companies issue only in demat and facilitate dematerialisation of existing securities.
- Promoter, director and KMP holdings must be dematerialised before fresh issue, buy-back, bonus or rights issue.
- Holders dematerialise before transfer or subscribing to new securities.
- Depository/RTA dues, security deposit and half-yearly PAS-6 reconciliation apply.
- Nidhis, Government companies and wholly owned subsidiaries are excluded.
Rule 9BPrivate-company dematerialisation
- Applies to private companies other than small companies; Government companies are excluded.
- A company not small at the end of an FY ending on or after 31 March 2023 complies within 18 months after that FY-end.
- Issue, transfer and subscription controls mirror Rule 9A, with Rule 9A(4)-(10) applying mutatis mutandis.
Rule 10Information memorandum for shelf prospectus
- File PAS-2 at least one month before a second or subsequent offer under the shelf prospectus.
- Disclose material changes, new charges and financial-position changes since the previous offer.
Rule 11Refund of application money
- Where minimum subscription is not received, refund within 15 days from issue closure.
- Delay attracts 15% annual interest.
- Refund to the bank account from which the subscription was received.
Rule 12Return of allotment
- File PAS-3 after allotment.
- Ordinary allotments are generally filed within 30 days; private-placement allotments within 15 days.
- Attach certified allottee list and supporting resolutions/contracts/valuation for applicable non-cash, bonus and preferential issues.
Rule 13Payment of commission
- Articles must authorise the payment.
- Maximum commission is 5% of share issue price and 2.5% of debenture issue price, or the lower limit in the articles.
- Disclose in prospectus/statement and file the relevant contract.
- No commission for securities not offered to the public.
Rule 14Private placement offer and application
- Prior special resolution for each offer, with specific annual-relief routes for NCD and QIB offers.
- Offer to no more than 200 persons per financial year for each kind of security, excluding QIBs and ESOP offerees.
- PAS-4 serially numbered and specifically addressed; dispatch within 30 days of recording the name.
- No renunciation or public advertising; maintain PAS-5.
- Subscription only through subscriber banking channels; no cash.
- Allot within 60 days; refund in the next 15 days or pay 12% annual interest.
- File PAS-3 within 15 days; do not use money until allotment and filing.
200
Non-excluded persons per kind/FY
Non-excluded persons per kind/FY
30 days
PAS-4 dispatch after name recording
PAS-4 dispatch after name recording
60 + 15
Allotment and refund windows
Allotment and refund windows
12%
Annual interest after day 60
Annual interest after day 60
Dual release gate: private-placement money remains blocked until securities are allotted and PAS-3 is filed.
Private placement lifecycle
Timeline and fund-control map
Private placement approvals
Approval, person-count and offer controls
| Control | Requirement | Evidence |
|---|---|---|
| Identified persons | Board-approved list before offer; address and identity recorded. | Board paper, PAS-5 and investor KYC. |
| Member approval | Prior special resolution for each offer, subject to the specific annual NCD/QIB relief. | Notice with price/valuation/use disclosures, resolution and filing. |
| Person cap | Maximum 200 persons per FY for each kind of security; QIB and ESOP offers excluded. | Rolling annual count by equity, preference share and debenture. |
| Offer document | Serially numbered PAS-4 specifically addressed and sent within 30 days of recording the name. | Dispatch proof and locked investor-specific document. |
| No publicity | No advertisement, media, social platform or public distribution channel. | Communication control and access log. |
| No renunciation | Only the addressed person can apply. | Application matching and rejection protocol. |
Separate-kind example: 180 offerees for preference shares and 180 different offerees for NCDs do not breach the numeric cap solely because the combined count is 360. The cap is tested separately by kind, while every other condition remains applicable.
Money and allotment
Banking trail, allotment, refund and use
| Stage | Rule | Control test |
|---|---|---|
| Receipt | Subscriber's banking channel; no cash | Application name, bank remitter and allottee must reconcile. |
| Custody | Separate bank-account discipline under the statutory framework | No operating use while issue remains pending. |
| Allotment | Within 60 days of receipt | Track each receipt date; not only issue-closing date. |
| Refund | Within next 15 days if no allotment | Refund to originating account. |
| Late refund | 12% annual interest after expiry of 60 days | Interest calculation and Board escalation. |
| PAS-3 | Within 15 days of private-placement allotment | Complete allottee list, resolutions and valuation/contract support. |
| Use of money | Only after allotment and PAS-3 filing | Dual-gate bank release control. |
PAS-4 content
Disclosure blocks that make the offer decision-useful
Issuer and management
- Registered/corporate office
- Business and subsidiaries
- Directors and management
- Risk perception
- Defaults and compliance officer
Offer terms
- Security and amount
- Price and valuation basis
- Objects and schedule
- Promoter contribution
- Security/charge terms
- Control impact
Legal and financial
- Interests and related parties
- Litigation/investigations/fraud
- Auditor qualifications
- Capital history
- Three-year profits, cash flows and financial position
Disclosure risk: A technically complete form can still mislead if a material licence suspension, default, litigation or adverse change is omitted.
Public-offer controls
Prospectus, RHP, shelf and allotment
| Document/control | Key requirement | Risk |
|---|---|---|
| Prospectus | Current Act and SEBI disclosure, signatures, consents and filing. | Misstatement or material omission creates criminal/civil exposure. |
| Red herring prospectus | File at least three days before opening; highlight final variations. | Using a draft as final disclosure or hiding price/quantity changes. |
| Shelf prospectus | Validity not exceeding one year; PAS-2 at least one month before later offer. | Stale financial/default information in a later tranche. |
| Abridged prospectus | Accompany application form subject to statutory exceptions and SEBI format. | Application circulated without essential disclosure. |
| Minimum subscription | No allotment unless stated minimum and application sums are received. | Partial allotment contrary to prospectus. |
| Refund | Rule 11: 15 days from issue closure; 15% annual interest on delay. | Refund to a third-party account or delayed refund. |
| Exchange permission | Apply before offer; public money in a separate scheduled-bank account. | Using application funds without listing permission. |
Dematerialisation
Rules 9A and 9B compliance gates
| Class | Applicability | Transaction gate |
|---|---|---|
| Unlisted public company | Rule 9A, excluding Nidhi, Government company and wholly owned subsidiary. | Promoter/director/KMP holdings in demat before fresh issue, buy-back, bonus or rights issue. |
| Private company | Rule 9B: private companies other than small companies; Government companies excluded. | Covered company and relevant holders must complete demat before issue, transfer or subscription. |
| Status deadline | Where not small at FY-end on/after 31 March 2023, comply within 18 months after that FY-end. | 31 March 2024 status ordinarily gives 30 September 2025 deadline. |
| Ongoing compliance | Depository/RTA dues, security deposit, reconciliation and PAS-6. | No transaction should proceed while issuer-side compliance is deficient. |
Direct listing
Section 23(3) permitted-exchange overlay
- Eligible public companies may use the prescribed framework for equity listing on permitted exchanges in the IFSC.
- Read the Companies Listing of Equity Shares in Permissible Jurisdictions Rules, the Scheme, FEMA Non-Debt Instruments Rules and current IFSCA Listing Regulations together.
- New issue and qualifying offer for sale can be available subject to eligibility, pricing, investor and exchange rules.
- Use current Form LEAP-1 and current exchange/IFSCA instructions on the filing date.
Current-law control: Direct-listing forms and IFSCA requirements can change without altering sections 23-42. Recheck the full operative package at launch.
Liability map
Sections 34-38 - who can be exposed?
| Section | Exposure | Professional safeguard |
|---|---|---|
| 34 | Criminal liability for untrue/misleading statements or material inclusion/omission made with fraud. | Disclosure committee, verification notes and final bring-down. |
| 35 | Compensation liability of company, directors, promoters, authorisers and consenting experts, subject to defences. | Role-based diligence, consents and withdrawal controls. |
| 36 | Fraudulent or reckless inducement to invest, including deceptive forecasts or agreements. | Forecast governance and evidence-supported marketing. |
| 37 | Affected persons, groups or associations may take action under sections 34-36. | Investor-complaint and litigation readiness. |
| 38 | Personation, multiple applications and fictitious-name allotment; disgorgement possible. | KYC, bank and duplicate-application controls. |
Forms and documents
Primary form map
| Form/document | Purpose | Key timing |
|---|---|---|
| PAS-1 | Newspaper advertisement for variation of public-issue objects/contract. | Simultaneous with member-notice process. |
| PAS-2 | Information memorandum for later shelf offer. | At least one month before subsequent offer. |
| PAS-3 | Return of allotment. | 15 days for private placement; generally 30 days for other allotments. |
| PAS-4 | Private placement offer-cum-application. | Within 30 days of recording identified person's name. |
| PAS-5 | Record of private placement offers. | Maintain complete, current record. |
| PAS-6 | Half-yearly reconciliation of share capital audit. | Rules 9A and 9B framework. |
| PAS-7 / PAS-8 | Historic share-warrant information and holder notice. | 2023 transition process. |
| MGT-14 | Specified special resolutions and approvals. | Apply filing requirement and exemptions to the company type. |
| Prospectus/RHP/shelf | Public-offer disclosure documents. | Act, SEBI, exchange and Registrar timelines. |
| LEAP-1 | Prescribed direct-listing prospectus. | Use current substituted form and operative route. |
Practical cases
Twelve professional scenarios
1. Social-media PAS-4: An open link inviting investment is public solicitation and cannot be cured by labelling responses private placement.
2. 201st debenture offeree: The annual cap is breached for that kind of security even if offers were split into tranches.
3. Equity and NCD counts: 180 equity offerees and 180 NCD offerees are counted separately by kind.
4. Use before PAS-3: Allotment alone is insufficient; funds remain blocked until PAS-3 is filed.
5. Cash subscription: Cash receipt is not permitted for private placement.
6. Third-party remitter: The subscription must come from the subscriber's bank account, subject to the joint-holder rule.
7. Day 76 without refund: The 12% annual interest consequence has commenced.
8. Shelf issue after default: A later tranche without PAS-2 material update gives stale disclosure and violates the shelf process.
9. Omitted licence suspension: Literal accuracy of financial figures does not cure a material omission.
10. Covered private company physical bonus: Rule 9B issuer and holder demat gates block the transaction.
11. Public minimum not reached: Reduce-and-allot is not permitted contrary to the prospectus; refund controls apply.
12. Expert withdrew consent: The report cannot remain in the prospectus without valid consent and liability review.
Audit and secretarial checklist
Issue file and red flags
Core evidence
- Route-classification memo
- Board/member approvals
- Valuation and price basis
- Investor/offeree count register
- Offer-document verification notes
- Bank and allotment reconciliation
- PAS filing acknowledgements
- Demat/ISIN/depository evidence
Immediate red flags
- Public advertising of private placement
- 201st non-excluded person
- Cash or third-party subscription
- Use before PAS-3
- Late allotment/refund
- Physical issue after Rule 9A/9B deadline
- Stale shelf disclosure
- Material omission or unverified forecast
Finin2min Q&A
Quick answers
Can a private company make a public offer?
No. It may use rights/bonus or private placement, subject to the Act.
No. It may use rights/bonus or private placement, subject to the Act.
Can PAS-4 be renounced?
No. Only the identified addressee can apply.
No. Only the identified addressee can apply.
When can private-placement funds be used?
Only after allotment and filing PAS-3.
Only after allotment and filing PAS-3.
Are Rules 3-6 current?
No. They were omitted in 2018.
No. They were omitted in 2018.
Does Rule 9B apply to every private company?
No. Small companies and Government companies are outside the rule, subject to status testing.
No. Small companies and Government companies are outside the rule, subject to status testing.
Primary-source and update control
Companies Act, 2013 - sections 23-42, consolidated India Code text.
Companies (Prospectus and Allotment of Securities) Rules, 2014 and Gazette amendments, including 2018 Rule 14 substitution, 2020 QIB relief and 2023 Rule 9B framework.
Companies Listing of Equity Shares in Permissible Jurisdictions Rules, Scheme, FEMA and IFSCA Listing Regulations for direct listing.
Professional-use note: Apply current SEBI, IFSCA, FEMA, exchange and MCA form instructions on the transaction date.
Professional answer method: classify the route -> identify the Act section -> overlay the rule/form -> state approval and deadline -> conclude with refund, liability or deemed-public-offer consequence.
Source and review trail
Use the current official instrument, portal or regulator publication before acting. This panel separates the category authority from page-specific references.
- Primary category
- Business Case Studies & Corporate Strategy
- Official starting point
- www.mca.gov.in
Page source links
The prior page did not embed a page-specific external source. The category authority above is the minimum verification starting point; a specific instrument should be added when available.