Pursuant to the decision in the case of Sahara India Real Estate … vs Securities & Exch.Board Of India, it is believed that any offer made to fifty or more persons, will be a public issue.  While in the above decision, Supreme Court interpreted the provisions of 67 of Companies Act, 1956, similar provisions are to be found in Companies Act, 2013 in s.42 and ratio would apply to securities issued in terms of Companies Act, 2013 as well.  In case of a public issue, all the provisions for public issues including a listing of securities, etc. will apply and SEBI will have jurisdiction.

While there cannot be any dispute to above proposition, it is the authors believe that if multiple offers are made to less than fifty persons, the fact that the total number of offerees in a given year exceeds 50 does not make it a public issue if other conditions for private placement in terms of s.42 are satisfied, for there had been no rules putting a cap on the number of persons who can be offered the securities in a given financial year until 01.04.2014.    The Companies (Prospectus and Allotment of Securities) Rules 2014 that came in force wef 01.04.2014 prescribes a cap that in a span of one financial year, offer or invitation should not have been made to more than 200 persons in the aggregate.    That being the position, the author is of the view that if multiple offers (each being made to less than fifty number of persons) were made prior to 01.04.2014 with an aggregate number of offerees being any number, it will still be a private placement subject to satisfaction of other conditions.  Post 01.04.2014, the issue should be considered as private placement subject to an aggregate number of offerees being less than 200 in one financial year and subject to satisfaction of other conditions of the private placement. It is the author’s view that the assumption of jurisdiction in such cases by SEBI is challengeable.    

#SEBI # Privateplacement #publicissue 

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