The words a private placement uses

Private placement

An offer of a company’s shares or other securities to a select group of persons the company has identified, rather than to the public. In India it is governed by Section 42 of the Companies Act 2013, and it is the only route MSME Exchange supports.

Basis: Companies Act 2013, Section 42

Identified persons

The people a company’s board names before it makes a private placement offer. An offer may be made only to them, so a person who was not identified cannot subscribe.

Basis: Companies Act 2013, Section 42; enforced on MSME Exchange by the offer register

No public advertisement (Section 42(7))

A company making a private placement may not advertise the offer to the public or use media or marketing channels to tell the public about it. That is why no company, raise or figure appears on MSME Exchange’s public pages.

Basis: Companies Act 2013, Section 42(7)

200-investor limit

No more than 200 investors per company per financial year under Section 42. MSME Exchange enforces the limit at the moment an investor commits.

Basis: Companies Act 2013, Section 42; enforced when an investor commits

Form PAS-4

The private placement offer letter, addressed to one named person. MSME Exchange records when, how and to whom each letter was sent, and that record cannot be changed afterwards.

Basis: Companies (Prospectus and Allotment of Securities) Rules 2014, Rule 14

Form PAS-5

The company’s record of its private placement offers: who was offered, and when. On MSME Exchange it is kept as the offer register.

Basis: Companies (Prospectus and Allotment of Securities) Rules 2014, Rule 14

Separate bank account (Section 42(6))

Subscription money is paid into a separate bank account of the company, through a banking channel and never in cash. It moves from the investor to the company, and MSME Exchange is never in the path.

Basis: Companies Act 2013, Section 42

Allotment window

If a company has not allotted shares within 60 days of receiving the application money, it must repay the investor within a further 15 days, with interest after that.

Basis: Companies Act 2013, Section 42(6)

Allotment

The board’s decision to issue shares to a subscriber. The shares are credited to a demat account in the investor’s own name.

Basis: Companies Act 2013; how it works on this site

Form PAS-3

The return of allotment a company files with the Registrar of Companies after an allotment, within the time the law sets. MSME Exchange records the filing reference and has a second person check it; the company files the form, and MSME Exchange does not file it for anyone.

Basis: Companies Act 2013, Sections 39 and 42, and the rules made under them

Demat account

An account with a depository participant, in the investor’s own name, in which shares are held electronically. MSME Exchange never holds shares for anyone.

Basis: Depositories Act 1996; how it works on this site

UTR (Unique Transaction Reference)

The reference number a bank gives an NEFT, RTGS or IMPS transfer. On MSME Exchange the investor records it, and the company confirms the money reached its account.

Basis: Banking practice; issuer confirmation of receipt on MSME Exchange

KYC (Know Your Customer)

Checking who a person is before they can invest. On MSME Exchange each check is recorded with its source and the date it was made, never as a bare tick.

Basis: Verification records on MSME Exchange

CA / CS

Chartered Accountant and Company Secretary: the professionals who usually prepare and certify a company’s private placement documents. A CA or CS assigned to a company on MSME Exchange can review its records and confirm receipt of subscription money.

Basis: Chartered Accountants Act 1949; Company Secretaries Act 1980; issuer confirmation on MSME Exchange

MSME

A micro, small or medium enterprise: an Indian business classified by its investment and turnover under the Micro, Small and Medium Enterprises Development Act 2006.

Basis: MSMED Act 2006, Section 7

SME platform (BSE SME, NSE Emerge)

The segments of BSE and NSE for listing small and medium enterprises. MSME Exchange’s listing-readiness track helps a company prepare for one; it does not list companies and is not connected to either.

Basis: SEBI (ICDR) Regulations 2018, Chapter IX; Track A on this site

Stock exchange

A market recognised under the Securities Contracts (Regulation) Act 1956 where investors deal in securities with each other; MSME Exchange is not one, and it has no order book, no trading and no prices.

Basis: Securities Contracts (Regulation) Act 1956, Sections 2(j) and 4

Illiquidity

Shares bought in a private placement usually cannot be sold quickly, and there is no secondary market on MSME Exchange through which to sell them, so money invested may be locked in for years or lost.

Basis: Risk disclosure on this site

Risk disclosure

The statement of risks an investor reads and acknowledges before subscribing. MSME Exchange keeps every version an investor acknowledged, word for word.

Basis: Risk disclosure on this site; versioned acknowledgements in the product

For what can go wrong, read the risk disclosure; for how a raise runs end to end, see how it works.