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Company compliance

Private Placement Compliance Checker — Section 42

Reviewed by Finin2min Editorial Desk · Last reviewed 11 August 2026

Screen identified-person limits, offer documentation, banking channel, allotment timing and PAS filings for a private placement.

Screen private placement

Section 42 screen
Offeree headroom
Separate limits apply for each kind of security; rights, bonus, ESOP and qualified institutional routes differ.

How This Is Calculated

Private placement of securities under Section 42 is capped at 200 persons in a financial year (excluding QIBs and ESOP allottees) per offer/invitation — exceeding this count converts the offer into a deemed public offer, triggering significantly more onerous public-issue compliance requirements.

Frequently Asked Questions

What is the maximum number of persons in a private placement offer?
200 persons in a financial year, excluding Qualified Institutional Buyers (QIBs) and employees receiving securities under an ESOP — this cap applies per offer, and the count resets each financial year.
What happens if the 200-person limit is exceeded?
The offer is deemed to be a public offer, which triggers the much more extensive compliance requirements applicable to public issues — including prospectus requirements — that private placement was specifically designed to avoid.
Last reviewed: 15 July 2026

Methodology, assumptions and sources

Scope: Checks compliance requirements for a private placement of securities under Section 42 of the Companies Act, 2013, including the offer-recipient limit and the separate-bank-account requirement.

Calculation logic

  1. Check the offer-recipient limit: a private placement offer cannot be made to more than 200 persons in aggregate in a financial year (excluding qualified institutional buyers and employees under an ESOP scheme, per the specific exclusions) — exceeding this limit converts the offer into a deemed public offer, triggering full public-issue compliance instead.
  2. Check the separate-bank-account requirement: application money received for a private placement must be kept in a separate bank account with a scheduled bank and can only be used for allotment of securities or repayment of the money if allotment is not made, per the specific fund-segregation rule.
  3. Check the allotment timeline: securities must be allotted within 60 days of receipt of application money, failing which the company must repay the application money within 15 days of the 60-day expiry (with interest for further delay), per the current provision.

Inputs and assumptions

Exclusions and edge cases

Sources

Review status: reviewed and approved by CA Nikhil Gupta on 18 July 2026.

© 2026 Finin2min · Educational decision support · Validate assumptions and applicable law.

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Background, worked examples and the rules behind these numbers.