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Issuing new shares: rights issue, private placement and PAS-3

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When a private company raises money from founders or investors, it issues new shares. The route depends on who is getting the shares: existing shareholders in proportion (rights issue) or specific new investors (preferential allotment through private placement). Either way, the company files PAS-3 after allotment.

The routes

RouteSectionKey requirements
Rights issue62(1)(a)Offer to all shareholders in proportion; board approval; offer period as per rules (private companies can shorten with member consent)
Preferential allotment / private placement62(1)(c) and 42Special resolution; registered valuer's report; private placement offer letter in PAS-4; separate bank account; allot within 60 days
ESOPs62(1)(b)Special resolution approving the scheme

Private placement in practice

  1. 1.Check authorised capital; increase it if needed (SH-7).
  2. 2.Get a valuation report from a registered valuer.
  3. 3.Board approves the issue and the offer letter.
  4. 4.Shareholders pass a special resolution; file MGT-14.
  5. 5.Send PAS-4 offer letters to identified investors; record in PAS-5.
  6. 6.Receive money from investors' own bank accounts into a separate bank account.
  7. 7.Allot shares within 60 days of receiving money.
  8. 8.File PAS-3 within 15 days of allotment.

Frequently asked questions

The money must be refunded within 15 days after that, failing which interest at 12% a year applies.

This guide is general information, not legal advice. Government fees and procedures change; confirm current figures before you file.

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