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

Step 1: Understand the Key Phrase:
The question describes offering securities to a "select group of persons" and specifically excludes a "public offer".
Step 2: Evaluate Options against the Definition:
(A) Sweat Equity: For employees/directors for know-how/IPR, not a general select group.
(B) Incorporation Cost: Expense during company formation, not a security offer method.
(C) Private Placement: Offer to a select group (identified persons), explicitly not a public offer. This matches the definition perfectly (as per Section 42, Companies Act, 2013).
(D) ESOP: Options given to employees, not a direct offer to a general select group.
Conclusion:
The offer described is known as a Private placement of shares.