Private Placement is a method of raising funds by issuing shares, debentures, or other securities to a selected group of persons (not exceeding 200 in a financial year, excluding qualified institutional buyers and employees under ESOP). It is governed by Section 42 of the Companies Act, 2013 and the rules made thereunder.

A company opting for private placement must obtain approval through a special resolution in a general meeting. The offer is made through a Private Placement Offer Letter (Form PAS-4), and the company must maintain a complete record of such offers in Form PAS-5. The funds must be received through proper banking channels and not in cash.

The allotment of securities must be completed within 60 days of receipt of application money, and the return of allotment must be filed with the Registrar of Companies (ROC) in Form PAS-3. If the company fails to allot securities within the prescribed time, the application money must be refunded within 15 days.

Private placement is a preferred fundraising option as it allows companies to raise capital efficiently while ensuring compliance and investor confidence.