Difference between Private Placement and Preferential Allotment of Shares

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Sl. No.

Type of Difference

Private Placement

Preferential Allotment




Section 42 of the Companies Act, 2013

Section 62(1)(C) of the Companies Act, 2013



Rule 14 of the Companies (Prospectus and Allotment of Shares) Rules, 2014

Rule 13 of the Companies (Issue of Share Capital and Debentures) Rules, 2014


Issue of Shares / Securities

“securities” include—

(i) shares, scrips, stocks, bonds, debentures, debenture stock or other marketable

securities of a like nature in or of any incorporated company or other body


“shares or other securities” means equity shares, fully convertible debentures, partly convertible debentures or any other securities, which would be convertible into or exchanged with equity shares at a later date.


Offer Letter

Private Placement Offer letter in prescribed form “PAS 4)

No prescribed format. However, the offer shall be made by notice specifying the number of shares offered and limiting a time not being less than fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to have been declined.


Limit on the number of person to whom offer will be given

A private placement shall be made only to a select group of persons who have been identified by the Board, whose number shall not exceed fifty [excluding the QIB and Employees under a scheme of ESOP], in a financial year subject to such conditions as may be prescribed.

Same as applicable in Private Placement


Application Money / Consideration

Payment through Cheque, Demand Draft or other banking channels but not by Cash

Consideration can be for Cash or for a consideration other than Cash


Separate Bank Account


Not specifically required


Valuation Report

Not required



Authorisation in Articles

No authorisation in AOA is required

Authorisation is AOA is required


Special Resolution

Prior Special Resolution is required

Prior Special Resolution is required


Allotment time

Within 60 days of receipt of Application money

Allotment shall be completed within a period of 12 months from the date of passing special resolution


Right of renunciation

Private placement offer and application shall not carry any right of renunciation.

No such restriction


Restriction on fresh offer

No fresh offer or invitation shall be made unless the allotments for earlier offer or invitation have been completed.

No such restriction



Filing of documents with ROC etc.

Offer letter in prescribed Form PAS-4 and eForm PAS-3 to be filed with ROC.


Record of Private Placement Offer to be maintained by the Company in prescribed Form PAS-5.


eForm PAS-3 (return of allotment) to be filed with ROC.

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