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:

Distinguish between different share issue methods: Public Offer (to anyone), Private Placement (to selected persons, max 200 per year excluding QIBs/employees), Rights Issue (to existing shareholders), ESOP/Sweat Equity (to employees/directors).

Answer 1

The Correct Option is C

To solve the problem, we need to identify the term for the offer of securities or invitation to subscribe securities to a select group of persons by a company, other than through a public offer.

1. Understanding the Types of Securities Offer:
When a company offers securities, it can do so through a public offer (available to the general public) or through a non-public offer to a specific group of persons. The latter is a method where the company targets a select group, such as institutional investors, high-net-worth individuals, or specific stakeholders, without making a general public offer.

2. Identifying the Correct Term:
The process of offering securities to a select group of persons, other than by way of a public offer, is known as 'Private Placement'. In a private placement, the company invites a specific group to subscribe to its securities, often to raise capital without the regulatory requirements of a public issue. This is distinct from a public offer, sweat equity (shares issued to employees for non-cash consideration), incorporation cost (related to company formation), or an employee stock option plan (shares offered to employees as part of compensation).

Final Answer:
The 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 Private Placement. The correct option is C.