PAS-4: Private Placement Letter of Offer — Process & Compliance

What is Form PAS-4?

PAS-4 is the offer letter / private placement offer cum application letter under Section 42 of the Companies Act, 2013. It is issued by the company to a specific identified list of persons (max 200 per FY) inviting them to subscribe to its securities.

PAS-4 is the FIRST step in any private placement (rights issue, preferential allotment, fresh equity to investors). Without it, allotment is invalid and triggers Section 42(10) penalty (up to ₹2 cr).

When PAS-4 is required

PAS-4 is required for any private placement of:

• Equity shares (to angel investors, VCs, family/friends)
• Preference shares (CCPS, OCRPS, etc.)
• Debentures (convertible or non-convertible)
• Other securities (Section 42 specific)

Exemptions:

• Rights issue to existing shareholders (use Section 62, not Section 42)
• ESOP allotment (separate Section 62(1)(b))
• Bonus issue
• Sweat equity (separate Section 54)

Pre-PAS-4 board and member compliance

1. Board Resolution — Approving the private placement, identifying investors, valuation
2. Valuation Report — By registered valuer (Section 247 — Rule 11UA / 11UAA for tax)
3. Special Resolution — By shareholders at EGM authorizing the private placement (per Section 42(2))
4. Identify specific 'identified persons' — Names, addresses, contact details (max 200 in a FY)
5. File MGT-14 — Special resolution intimation within 30 days

Issuing PAS-4 — Content and form

PAS-4 must contain:

• Company background, MOA objects
• Names of identified persons
• Number and class of securities being offered
• Price per security (must match valuation)
• Justification of price (basis of valuation)
• Use of proceeds
• Risk factors
• Right to subscribe (offered to specific persons, not transferable)
• Bank account where subscription money will be received (separate dedicated account)
• Application form attached

Send PAS-4 individually to each identified person — NO public advertisement, NO media broadcast.

Post-PAS-4 compliance

1. Receive subscription money in dedicated bank account from identified persons (their personal accounts)
2. Maintain record — PAS-5 (record of private placement) maintained by company
3. Allot within 60 days — Allot securities to subscribers within 60 days of receiving money (Section 42(6))
4. If not allotted within 60 days — Refund money within 15 days. Otherwise 12% p.a. interest payable.
5. File PAS-3 — Within 30 days of allotment with allotment details
6. Issue share certificates — Within 60 days of allotment
7. For foreign investors: File FC-GPR within 30 days