Reviewed by CA Nikhil Gupta · Last reviewed 11 October 2026
Screen identified-person limits, offer documentation, banking channel, allotment timing and PAS filings for a private placement.
Company compliance calculator · Finin2min
Private Placement Compliance Checker: Companies Act Section 42 and PAS Forms
Screen a proposed identified-person securities offer against the main Section 42 private-placement controls. A green result means the entered checkpoints align, not that the offer has received legal approval.
Author: CA Nikhil Gupta · Reviewer: CA Nikhil Gupta · 11 October 2026
What you need to know
Headcount rule
Under the Companies Prospectus and Allotment of Securities Rules, the general private-placement ceiling is 200 persons in aggregate in a financial year for each kind of security, with specific exclusions for qualified institutional buyers and employees under an employee share option scheme. Other offers and rules have to be counted in the correct bucket.
Personal, not public, offer
Offers are to identified persons through serially numbered Form PAS-4; maintain the complete offer record in PAS-5 and supporting approvals. General advertising or unrestricted renunciation can jeopardise the private character of an offer.
Banking and allotment controls
Application money has banking-channel and designated-account restrictions. Section 42 generally requires allotment within 60 days of receipt of application money or refund within the next 15 days; failure to refund triggers statutory interest consequences. These clocks cannot be waived by a simple checkbox.
Return and use-of-funds restrictions
Section 42 requires return of allotment PAS-3 within the prescribed window, ordinarily 15 days from allotment under the amended scheme. Restrictions on use of funds before allotment/return filing and detailed filing rules must be checked for the issue type.
Private placement check
Reference point
General annual person ceiling
200 per kind of security, subject to exclusions
Allotment
Ordinarily within 60 days of receipt of money
Refund on no allotment
Within next 15 days; interest if required
Return of allotment PAS-3
Ordinarily within 15 days of allotment
Worked example
A company plans to offer debentures to 150 identified non-QIB investors and has made an earlier offer to 70 people of the same security type in the financial year. The screen must consider the aggregate 220-person figure and prior offers; entering only the new batch of 150 could give a dangerously misleading pass.
Practical action checklist
Map security type, identified offerees and prior same-year offers.
Remove only legally excluded persons with documented justification.
Confirm approvals, PAS-4 numbers, PAS-5 register and offer restrictions.
Calendar application money, allotment, refund and interest triggers.
File PAS-3 and reconcile restricted use of funds and records.
Common mistakes to avoid
Resetting the person count for each separate invitation.
Treating retail public advertising as a private placement.
Counting cash or third-party money as compliant subscription funds.
Treating screening output as a signed legal certificate.
How this provision works in practice
What the rule actually covers
Section 42 of the Companies Act and Rule 14 require a private-placement offer to be examined by financial year, identified offerees and security class. The ordinary 200-person ceiling excludes prescribed classes such as QIBs and employees under qualifying ESOP schemes; those exclusions are not blanket permission for a public invitation. The tool should distinguish an excluded category from a zero-count offer.
Worked example
A company proposes to offer securities to 170 identified persons after already making a counted offer to 55 persons during the same financial year. The indicative aggregate is 225 and fails a simple 200-offeree screen unless legally excluded persons or another permitted exception alters the calculation. A passed count does not by itself establish full compliance.
Documents and evidence to keep
Keep board and shareholder resolutions, serially numbered offer documentation, PAS-4/PAS-5 records as applicable, offeree list, prior offers within the financial year, banking trail and allotment-filing evidence. Validate output using a consolidated offer register.
Common mistake to avoid
Do not let an editable on-screen maximum override the statutory cap; related-party or existing-shareholder status is not an automatic exclusion.
It is tested across the financial year under the applicable Rule for each kind of security, subject to exceptions.
Can PAS-3 be filed whenever convenient?
No. Use the prescribed post-allotment period and current electronic Form requirements.
Does the tool cover SEBI public-issue law?
No. A separate securities-law analysis is required if the transaction may be deemed public.
Official primary sources
Use the operative signed statutory text, relevant amendments and the transaction-date instrument for compliance decisions. The following links lead to government or court materials.
Educational research, not transaction-specific legal, tax, accounting or investment advice. Statutory versions, applicable dates, local rules and the individual facts may change the outcome.
Run the calculator with your figures
The calculation is an informative screen. Blank, invalid and unsupported values are reported rather than silently interpreted as zero.
Screen outcome
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Available annual headroom
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Separate limits apply for each kind of security; rights, bonus, ESOP and qualified institutional routes differ.
Understanding this page: facts, law and evidence
Provision and applicability
Companies Act Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules control offers to identified persons, private-placement offer-cum-application documentation, banking channel subscription and allotment/return filings. The general numerical annual offeree limit is subject to category-specific exclusions and security-type counting rules. A 200-person screen alone does not authorise allotment or close a PAS-3 due-date defect.
Worked Indian fact pattern
A startup plans 48 identified offerees for debentures and had 175 identified offerees for the same class earlier in its financial year. Before circulating PAS-4 the secretary should reconcile annual unique counts, exclusion categories and permitted sequencing; entering “48” alone masks the aggregation risk.
Records to preserve and actions to take
Collect PAS-4/PAS-5 records as applicable, board and shareholder authorisations, identified-person register, banking receipt trail, allotment date, PAS-3 evidence and security-category headroom.
Exceptions, boundaries and current-law cautions
Director-relatives exclusions, QIB/ESOP treatment, layering, Section 62/SEBI effects and time-of-offer rules must be independently screened. Green output is not legal clearance.
This source is a starting point, not a claim-level authenticated signed instrument. The page remains held pending the instrument identified in the release register.
What matters: Section 42 private placement is an identified-person offering procedure. A general public advertisement or unverified online solicitation is not cured by completing PAS forms afterward.
How the rule works and where the boundary lies
The company must identify and record offerees, obtain necessary board/member approvals, issue the prescribed offer-cum-application and receive consideration via permitted banking channels. A private placement should be evaluated together with shareholder ceilings, consecutive-offer rules, allotment timing and return of allotment. Section 42 and the relevant 2014 Rules have been amended repeatedly; draft 2018 rule documents must not be cited as the current rule text.
Worked Indian business or consumer illustration
A start-up plans to issue preference shares to 40 identified investors. Before collecting money, its records should confirm shareholder approvals, valuation and pricing, the individual offer list and forms, bank account for proceeds, proposed allotment date and post-allotment PAS-3 filing. An emailed deck to thousands of strangers creates separate public-offer risk.
Documents and evidence to retain
Maintain PAS-4, PAS-5 if required, resolutions, valuation, identified-person register, bank receipts, allotment register, return filing and securities certificates. Tie amounts back to company accounts.
Common interpretation mistake
A green checklist answer is conditional—not an MCA compliance certificate. Verify the actual effective Companies Act and Rules before using the suggested 15-day filing benchmark.
This explanation supports general understanding; the applicable law, notification, tax period, jurisdiction and individual facts determine the result. Refer to operative primary instruments and obtain professional advice before filing or taking a legal position.
A finance or compliance professional reviewing Private Placement Compliance Checker — Section 42 needs to identify the real transaction, authority, statutory period and affected person before acting.
What changes the decision
Determine offer type, identified-person count, shareholder approval, PAS-4/5, banking restrictions and actual PAS-3 clock.
Documents and evidence to retain
Collect board resolution, shareholders special resolution as applicable, offer letter, PAS-5, bank statement, allotment minute and PAS-3 acknowledgement.
Worked numerical or documentary illustration
A ₹1 crore private placement subscribed by 60 identified persons cannot be deemed compliant merely because the count is under 200.
Limitations and exceptions
For Private Placement Compliance Checker — Section 42, a publication headline, older template or user-entered calculator value is not proof of legal compliance. Review amended instruments and actual records.
How to apply this information
Identify the triggering event for companies act section 42 private placement controls and record the exact transaction or reporting period. Determine offer type, identified-person count, shareholder approval, PAS-4/5, banking restrictions and actual PAS-3 clock.
For companies act section 42 private placement controls, compare the original legal instrument, operative amendment and regulator-issued directions. An FAQ or category index is useful for discovery but does not establish legal effect.
Collect the original evidence before filing, acting or recalculating: Collect board resolution, shareholders special resolution as applicable, offer letter, PAS-5, bank statement, allotment minute and PAS-3 acknowledgement.
Recreate the calculation from original inputs and document every assumption. A ₹1 crore private placement subscribed by 60 identified persons cannot be deemed compliant merely because the count is under 200.
Preserve acknowledgments, subsequent changes and exception analysis so a second reviewer can reproduce the conclusion. For Private Placement Compliance Checker — Section 42, a publication headline, older template or user-entered calculator value is not proof of legal compliance. Review amended instruments and actual records.
Official sources
For Companies Act Section 42 private placement controls, start with the dated governing regulation, regulator portal filing directions and intervening circulars. A publisher index locates official instruments but cannot certify that each historical requirement remains binding.
This companies act section 42 private placement controls explanation supports practical compliance preparation. Verify the applicable instrument, entity classification and event date before filing, paying, advising or acting on the illustrative numbers.
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
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.
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.
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
200-person limit, 60-day allotment window, and the separate-bank-account requirement follow the current Section 42 provisions and the Companies (Prospectus and Allotment of Securities) Rules.
A private placement offer must be made only to persons whose names are recorded by the company prior to the invitation (via a private placement offer letter, Form PAS-4), and each such offer requires a corresponding return of allotment (Form PAS-3) filing — the checker flags these procedural preconditions.
Exclusions and edge cases
No fresh private placement offer can be made unless allotments for all earlier offers have been completed or the earlier offer has been withdrawn/abandoned — a specific sequencing rule the checker flags where the user indicates a prior pending offer.
Does not itself file PAS-3/PAS-4 forms — this checker addresses compliance-condition applicability, with actual filing completed separately on the MCA portal.