Finload Limited wants to raise funds for its upcoming project. Accordingly, it has issued private placement offer letters for issuing equity shares…

CA Intermediate · Corporate and Other Laws · MTP · May 2024
Finload Limited wants to raise funds for its upcoming project. Accordingly, it has issued private placement offer letters for issuing equity shares to 57 persons, of which six are qualified institutional buyers and remaining are individuals. Choose the correct statement as per the provisions of the Companies Act, 2013:
(A) Finload Limited company is a public limited company hence it can not issue shares through private placement.
(B) Since, Finload Limited has made an offer or invitation to more than the prescribed number of persons, it shall be deemed to be an offer to the public and accordingly, it shall be governed by the provisions relating to prospectus.
(C) Finload Limited has made an offer or invitation to less than the prescribed number of persons as qualified institutional buyers are not counted to calculate the prescribed limit.
(D) Finload Limited cannot issue shares to qualified institutional buyers, as under private placement shares cannot be issued to qualified institutional buyers.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

Since, Finload Limited has made an offer or invitation to more than the prescribed number of persons, it shall be deemed to be an offer to the public and accordingly, it shall be governed by the provisions relating to prospectus.

Topics: The Foreign Exchange Management Act, 1999, Prospectus and Allotment of Securities

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