Question

Offer of securities or invitation to subscribe securities to a select group of persons by a company (other than by way of public offer) is known as:

• A. Sweat equity
• B. Incorporation cost
• C. Private placement of shares
• D. Employee stock option plan

Hint:

Remember the key distinction: Public Offer (to the general public) vs. Private Placement (to a selected group of persons). ESOP and Sweat Equity are specific types of share issues to employees/directors, falling under exceptions or specific regulations, while Private Placement is the general term for non-public offers.

Answer 1

The Correct Option is C

The concept being addressed here is a company offering securities or an invitation to subscribe to securities to a select group of persons, distinct from a public offer. This type of offer is referred to as a "Private placement of shares."

The relevant features of a private placement include:

• It is categorized under a non-public offer.
• Only select individuals or institutional investors are approached, differing from a broad public offering.
• Private placements are typically faster and less costly compared to public offerings.

Understanding the context underlying each option assists in identifying the correct answer:

• Sweat equity involves issuing shares to employees in lieu of work performed.
• Incorporation cost refers to expenses incurred during the formation of a company.
• Employee stock option plan allows employees to purchase company shares at a predetermined price.

Thus, the correct answer is "Private placement of shares," which specifically denotes offering securities to a select group other than the general public.