PAS-3 AND UNLISTED-SHARE ALLOTMENT
An Evidence Reader for Private-Placement Records
When a private company allots shares through private placement, the paperwork that follows is crucial. Form PAS-3, filed with the Registrar of Companies (ROC), publicly confirms that an allotment took place. However, PAS-3 alone is not sufficient—it forms part of a larger evidentiary chain. This guide explains how to read PAS-3 alongside other private-placement records when examining an unlisted-share allotment.
What Form PAS-3 Actually Is
Form PAS-3 is the statutory return of allotment filed with the ROC under Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 and Section 39 of the Companies Act, 2013. For securities issued through private placement under Section 42, it must generally be filed within 30 days of allotment.
It records key details such as the number of allottees, securities allotted, face value, premium, and allotment approval date. Since PAS-3 is part of the public record available through the MCA portal, it is a useful starting point for reviewing private placements—but it is a summary, not the complete transaction file.
The Legal Backbone of a Private Placement
A private placement of unlisted shares is governed primarily by Section 42 of the Companies Act, 2013, and the accompanying Rule 14 of the Prospectus and Allotment of Securities Rules. Together these provisions require:
• A private placement offer letter (Form PAS-4) issued only to identified persons, not exceeding 200 in a financial year (excluding qualified institutional buyers and employees under a stock option scheme).
• A special resolution or board resolution, as applicable, authorising the offer before it is circulated.
• A separate bank account into which application money is received, with no security allotted unless the money has come through that account.
• Filing of the offer letter with the ROC before the offer is circulated, and filing of PAS-3 within 30 days of allotment.
Each step generates its own document, with PAS-3 coming last. Since it is filed after payment and share allotment, it should be cross-checked with the records from earlier stages.
Reading PAS-3 as Evidence: What the Form Actually Shows
When PAS-3 is used as evidence — whether in a valuation exercise, a due-diligence review, a compliance audit, or a dispute — a few fields carry most of the weight:
1. Date of allotment and date of filing — a gap larger than 30 days between the two is a compliance lapse and worth flagging on its own.
2. Number and category of allottees — this should reconcile with the offerees named in the PAS-4 offer letter; new names appearing in PAS-3 that never received an offer letter is a mismatch.
3. Nature of the allotment (equity, preference, convertible instruments) — this determines which valuation and disclosure rules apply.
4. Consideration received — cash, other than cash, or conversion of a loan — each has different documentary support requirements.
5. Authorising resolution reference — the resolution date on PAS-3 should match the board or shareholder minutes on file.
None of these fields, read alone, confirms that the allotment was properly conducted. They only confirm that a filing was made stating certain facts. The verification work lies in matching each field against the underlying record it claims to summarise.
The Supporting Document Trail
A private-placement file, when complete, is really a set of cross-referencing documents. The table below lists the core records an evidence reader typically looks for alongside PAS-3.
Common Discrepancies to Watch For
Certain mismatches recur often enough in private-placement files that they are worth listing explicitly:
• PAS-3 filed beyond the 30-day window from the date of allotment, without a corresponding condonation or additional fee disclosure.
• Allottees listed in PAS-3 who do not appear in the PAS-4 offer letter or in board minutes approving the offer.
• Application money traced to an account other than the separate private-placement bank account required under Section 42.
• Allotment made before the offer letter was filed with the ROC, reversing the required sequence.
• Register of members or PAS-5 entries that do not tally with the quantity or class of securities shown in PAS-3.
• Share certificates dated before the board resolution approving the allotment.
Why This Sequencing Matters
Section 42 was drafted with a specific sequence in mind: identify offerees, issue the offer letter, file it with the ROC, receive money only through the designated account, allot within the prescribed period, and then file PAS-3. Each step is meant to leave a trail that the next step can be checked against. Reading PAS-3 in isolation skips that trail. Reading it alongside PAS-4, the resolutions, the bank statement, and the register of members is what turns a single filing into a coherent evidentiary record.
Frequently Asked Questions
1. What is the difference between PAS-3 and PAS-4?
PAS-4 is the private placement offer letter sent to identified offerees before any money is collected. PAS-3 is the return of allotment filed with the ROC after the shares have actually been allotted. PAS-4 precedes the transaction; PAS-3 follows it.
2. Within how many days must PAS-3 be filed after allotment?
PAS-3 must be filed with the Registrar of Companies within 30 days from the date of allotment, along with the prescribed fee.
3. Does filing PAS-3 alone prove that a private placement was valid?
No. PAS-3 confirms that a filing was made stating certain facts about the allotment. Validity depends on whether the earlier steps under Section 42—offer letter, resolution, separate bank account, offeree limits — were also followed correctly.
4. Can private placement money be received in cash?
No. Application money for a private placement must be received through cheque, demand draft, or other banking channels into a separate bank account maintained for that purpose — not in cash.
5. What happens if a company allots shares before filing the offer letter with the ROC?
This reverses the sequence required under Section 42 and Rule 14, and is treated as a procedural non-compliance that can attract scrutiny during due diligence or regulatory review.
6. How many offerees can a private placement offer letter be issued to?
An offer can be made to not more than 200 persons in a financial year, excluding qualified institutional buyers and employees receiving securities under an employee stock option scheme, for the purpose of this ceiling.
7. Is a valuation report always required for a private placement of unlisted shares?
A valuation report from a registered valuer is generally required where securities are issued otherwise than for cash or at a premium, subject to the applicable rules for the type of security and company involved.
8. Where can PAS-3 filings be verified?
PAS-3 filings are public records that can be accessed through the Ministry of Corporate Affairs (MCA) portal by searching the relevant company's filing history.
9. What is the role of the register of members in verifying an allotment?
The register of members (or Form PAS-5 in certain private placement contexts) records who actually holds the allotted securities. It should be cross-checked against PAS-3 to confirm the allotment was reflected in the company's own records, not just filed with the ROC.
10. What should someone do if they find a mismatch between PAS-3 and the supporting documents?
Any discrepancy should be raised with a qualified company secretary, chartered accountant, or legal professional for review, since the appropriate next step depends on the specific facts, timelines, and applicable provisions involved.
Disclaimer:
This is written for educational and informational purposes only. Nothing here constitutes investment advice or a recommendation to buy or sell securities. All data is sourced from publicly available information. Investments in securities markets are subject to market risks — please read all offer documents carefully before investing