Issues draft rules to amend Rule 14 of PAS Rules

16th February, 2018

By CS Vinita Nair (

Substitution of Section 42 is one of the key amendments proposed in Companies (Amendment) Act, 2017 (Amendment Act). While, the Amendment Act is being enforced in phases, stakeholders have been awaiting the draft rules in relation to private placement. MCA on 15.02.2018 issued draft Companies (Prospectus and Allotment of Securities) (Amendment) Rules, 2018[1] (Amendment Rules) which is open for public comments till 07.03.2018[2].

This article discusses the key amendments proposed in the rules.

No minimum investment size

The erstwhile rules mandated minimum investment of atleast twenty thousand rupees of face value of securities. Amendment Rules provides no such minimum amount. Accordingly, the exemption for NBFCs and HFCs has been deleted.

Limit of 200 persons

While the limit of 200 persons remains intact, the exemption extended to NBFCs and HFCs has been deleted. While, the reason for deletion is stated to be on account of doing away with the requirement of minimum investment size, inadvertently, the other exemption of not limiting to 200 persons if  they are complying with regulations made by RBI or NHB in respect of offer or invitation to be issued on private placement basis, will also be deleted.

This needs to be restored.

Filing of offer letter with ROC and SEBI

The requirement to file PAS-4 and PAS-5 with ROC in e-Form GNL-2 has been done away with. Further, furnishing the same to SEBI is also not required as per Amendment Rules. This will surely provide ease procedural  compliance.

Disclosure in explanatory statement

Rules, 2014 mandated disclosing the basis or justification for the price (including premium, if any) at which the offer or invitation is being made.

Amendment Rules mandates disclosing several other details that formed part of ‘GENERAL INFORMATION’, ‘PARTICULARS OF OFFER’  and few of ‘DISCLOSURES WITH REGARD TO INTEREST OF DIRECTORS, LITIGATION ETC.’ in erstwhile PAS -4, in the explanatory statement. Further, the declaration by Director (para 5 of erstwhile PAS -4) is also proposed to be provided in explanatory statement.

Payment from bank account of person subscribing

The requirement shall not apply in case of issue of shares for conversion of loan. This was not provided in Rules, 2014.

Contents of PAS-4

Additional disclosures inserted (few appearing in Rule 13 of SHA Rules):

  • Any Default in Annual filing of the Company;
  • relevant date with reference to which the price has been arrived at;
  • the class or classes of persons to whom the allotment is proposed to be made;
  • the names of the proposed allottees and the percentage of post preferential offer capital that may be held by them;
  • the change in control, if any, in the company that would occur consequent to the preferential offer;
  • the number of persons to whom allotment on preferential basis have already been made during the year, in terms of number of securities as well as price;
  • the justification for the allotment proposed to be made for consideration other than cash together with valuation report of the registered valuer.
  • The pre issue and post issue shareholding pattern of the company in the following format
  • Details of applicant
    • Name
    • Father’s name
    • Complete Address including Flat/House Number, Street, Locality, Pin Code
    • Phone number, if any
    • email ID, if any
    • PAN Number
    • Bank Account Details:


The Amendment Rules proposed will require some amendment especially in case of exemption done away for NBFCs and HFCs in relation to 200 persons. Further, contents of PAS-4 need to be revisited. If the disclosures required in case of a preferential offer are being included in PAS-4, this will also have to be disclosed in case of private placement of NCDs.

See other articles on Companies (Amendment) Act, 2017 on – 


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