(1) A company may, subject to the provisions of this section, make a private placement of securities.

(2) A private placement shall be made only to a select group of persons who have been identified by the Board (hereinafter referred to as "identified persons"), whose number shall not exceed fifty or such higher number as may be prescribed, in a financial year and on such conditions as may be prescribed.

(3) A company making private placement shall issue private placement offer and application in such form and manner as may be prescribed to identified persons, whose names and addresses are recorded by the company prior to the invitation to subscribe.

(4) Every identified person willing to subscribe to the private placement issue shall apply in the private placement application issued to such person along with subscription money paid either by cheque or demand draft or other banking channel and not by cash.

(5) No company issuing securities under this section shall release any public advertisements or utilise any media, marketing or distribution channels or agents to inform the public at large about such an issue.

(6) A company shall not make a private placement of its securities unless—

1. the proposed offer of securities or invitation to subscribe securities has been previously approved by the members of the company, by a special resolution, for each of the offers or invitations:

   Provided that in the case of offer or invitation for non-convertible debentures, it shall be sufficient if the company passes a previous special resolution only once in a year for all the offers or invitations for such debentures during the year;

2. the offer of securities or invitation to subscribe securities shall be made to not more than such number of persons not exceeding two hundred in the aggregate in a financial year as may be prescribed.

(7) No fresh offer or invitation under this section shall be made unless the allotments with respect to any offer or invitation made earlier have been completed or that offer or invitation has been withdrawn or abandoned by the company.

(8) Subject to sub-section (2), a private placement of securities by a company shall be on such terms and conditions as may be prescribed.

(9) Where a company makes an offer to allot or allots securities to more persons than the maximum number of persons prescribed under sub-section (2), or to persons other than those identified persons, it shall be deemed to be an offer to the public and shall accordingly be governed by the provisions of Part I of this Chapter.

(10) If a company makes an offer or accepts monies in contravention of this section, the company, its promoters and directors shall be liable for a penalty which may extend to the amount involved in the offer or invitation or two crore rupees, whichever is lower, and the company shall also refund all monies to subscribers within a period of thirty days of the order imposing the penalty.