Tag: International Finance Mumbai University BMS Notes

Bangalore University B.com Notes

MK6.5 Retail Management

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Unit 1 Retail [Book]  
Retail Management VIEW
Retailing VIEW
Functions of Retailing VIEW
Types of Retailing VIEW
Forms of Retail Business Ownership VIEW
Retail Theories VIEW
Retail Business in India VIEW
Wheel of Retailing, Retail life cycle VIEW VIEW
Influencing Factors Present Indian Retail Scenario VIEW
International Perspective in Retail Business VIEW

 

Unit 2 Consumer Behaviour [Book]  
Consumer Behaviour VIEW
Buying Decision Process and its Implication on Retailing VIEW
Influence of Group on Buying Decisions Process VIEW
Individual Factors Affecting Consumer Behaviour VIEW
Customer Shopping Behaviour VIEW
Customer Service VIEW
Customer Satisfaction VIEW
Retail Planning Process VIEW
Factors to Consider in Preparing a Business Plan VIEW
Implementation VIEW
Risk Analysis VIEW

 

Unit 3 Store Location [Book]  
Choice of Store location VIEW
Factors Influencing Location of Store VIEW
Market Area Analysis VIEW
Trade area analysis, Rating Plan method, Site evaluation VIEW
Retail Operations: Stores Layout and Visual Merchandising VIEW
Stores Designing VIEW
Space Planning VIEW
Inventory Management VIEW
Merchandise Management VIEW
Category Management VIEW

 

Unit 4 Retail Marketing Mix [Book]  
Retail Marketing Mix VIEW
Product Decisions Related to Selection of Goods VIEW
Decisions Related to Delivery of Service VIEW
Pricing VIEW
Factors Influencing Pricing VIEW
Approaches to Pricing VIEW
Price Sensitivity VIEW
Value Pricing VIEW
Markdown Pricing VIEW
Place: Retail Store Location VIEW
SCM Principle VIEW
Retail Logistic VIEW
Computerized Replenishment System VIEW
Corporate Replenishment Policies VIEW
Promotion and their Setting Objectives VIEW
Retail Communication Effects VIEW
Promotional Mix VIEW
Human Resource Management in Retailing VIEW
Manpower Planning VIEW
Recruitment and Training VIEW VIEW
Compensation VIEW
Performance Appraisal Methods VIEW

 

Unit 5 [Book]  
Non-Store Retailing (E-Retailing) VIEW
The Impact of Information Technology in Retailing VIEW
Integrated Systems and Networking VIEW
Electronic Data Interchange (EDI) VIEW
Bar Coding VIEW
Electronic Article Surveillance VIEW
Electronic Shelf Labels VIEW
Customer Database Management System VIEW
Legal Aspect in Retailing VIEW
Social Issues in Retailing VIEW
Ethical Issues in Retailing VIEW
Bangalore University B.com Notes

Entrepreneurship and Ethics

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Unit 1 Entrepreneurship [Book]
Meaning, Definition and characteristics of Entrepreneurship VIEW
**Process of Entrepreneurship VIEW
**Barriers of Entrepreneurship VIEW
Meaning, Definition and characteristics of Entrepreneur VIEW
Functions of Entrepreneur VIEW VIEW
Factors influencing Entrepreneurship VIEW
Advantages and Disadvantages of Entrepreneurship VIEW
Qualities of an Entrepreneur VIEW
Types of Entrepreneurs VIEW
Brief history about successful entrepreneurs VIEW
Role of Artificial intelligence in Developing Enterprises VIEW

 

Unit 2 Micro, Small and Medium Enterprises [Book]
Meaning, Definition, investment limit of Micro, Small and Medium enterprise VIEW
Ownership Patterns of Micro, Small and Medium enterprise VIEW
Products and Services of MSME VIEW
Role played by MSME in the development of Indian Economy VIEW
Problems faced by MSME and the steps taken to solve the problems VIEW
Stages in setting up of MSME VIEW

 

Unit 3 Start-Ups [Book]
Meaning, Definition features types, Benefit and Limitation of startups VIEW
Players in the promotion of start ups VIEW VIEW
The role of incubation centers in grooming youngsters for startups VIEW
Objectives and Functions of incubation centers VIEW
Preparation of Business plan VIEW VIEW
Feasibility Reports: Financial, technical, marketing, product service, Legal VIEW
Causes for Success and Failure of start-ups in India VIEW
Start-ups India scheme, Features eligibility, Loan facilities matching grant VIEW
VIEW
Minimizing section imbalance through the promotion of startups in Urban and Rural India VIEW
Women entrepreneurs in startups VIEW VIEW VIEW

 

Unit 4 The Role of Banking and Financial Institutions in The Promotion of Entrepreneurs [Book]
Financial Assistance by Commercial banks to Entrepreneurs VIEW
VIEW
Financial Assistance by Co-operative banks to Entrepreneurs VIEW
Government Assistance through SFCs VIEW
SFCs VIEW
SIDBI VIEW
IFCI VIEW
Non-financial assistance from DIC, SISI, AWAKE, KVIC VIEW
Financial incentives for MSMEs and Tax Concessions VIEW VIEW
Assistance for obtaining Raw Material, Machinery, Land and Building and Technical Assistance VIEW
Industrial Estates: Role and Type VIEW

 

Unit 5 Ethics in Business [Book]
Meaning, Scope of Ethics of Business Ethics VIEW VIEW
Types of Business Ethics VIEW
Characteristics of Business Ethics VIEW
Factors influencing Business Ethics VIEW
Importance of Business Ethics VIEW
Ethics in Finance VIEW
Ethics in Production VIEW
Ethics in Marketing VIEW
Ethics in HR VIEW
Ethics in R&D VIEW
Bangalore University B.com Notes

Income Tax II

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Unit 1 Profits and Gains from Business or Profession [Book]
Meaning and Definition Business, Profession VIEW
Vocation VIEW
Expenses Expressly Allowed VIEW
Allowable Losses VIEW
Expenses Expressly Disallowed VIEW
Expenses Allowed on Payment Basis VIEW
Problems on Business relating to Sole Trader VIEW
Problems on Profession relating to Chartered Accountant, Advocate and Medical Practitioner VIEW

 

Unit 2 Capital Gains [Book]
Basis of Charge VIEW
Capital Assets, Transfer of Capital Assets VIEW
Computation of Capital Gains VIEW
Exemptions on Capital Gains U/S 54, 54B, 54D, 54EC, 54F VIEW
Problems on Capital Gains VIEW

 

Unit 3 Income from other Sources [Book]
Incomes VIEW
Heads of Income: Income from Salaries VIEW
Income from House & Property VIEW
Profits and gains of a Business or Profession VIEW
Income from Capital Gains VIEW
Taxable under the Head Other Sources VIEW
Securities, Kinds of Securities VIEW
Rules for Grossing Up VIEW
Ex-Interest Securities, Cum-Interest Securities, Bond Washing Transactions VIEW

 

Unit 4 Set Off and Carry Forward of Losses and Deductions from Gross Total Income [Book]
Provisions for Set-off and Carry forward of losses VIEW
Deductions u/s: 80 C, 80 CCC, 80 CCD, 80 D, 80 G, 80 GG, 80 GGA, and 80 U VIEW

 

Unit 5 Income Tax Authorities and Assessment of Individuals [Book]
Powers and Functions of CBDT, CIT, and AO VIEW
Assessment of Individuals VIEW
Provision for Set-off & Carry forward of losses VIEW
Computation of Total Income VIEW
Tax Liability of an Individual Assesses VIEW
Bangalore University B.com Notes

MK5.6 Advertising & Media Management

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Unit 1 Introduction & Basic Concepts [Book]
History of Advertising VIEW
Advertising purpose VIEW
**Advertising functions VIEW
**Advertising Importance, Scope VIEW VIEW
**Advertising Features, benefit VIEW
Economic, Social & Ethical aspects of advertising VIEW
Advertising & the Marketing mix. VIEW VIEW
Advertising as a communication process VIEW
Types of Advertising VIEW
Major Institutions of advertising management VIEW

 

Unit 2 Advertising and Campaign Planning [Book]
Marketing Strategy VIEW
Situation analysis VIEW
Advertising plan VIEW VIEW
Advertising Objectives VIEW
DAGMAR approach VIEW
Advertising Strategy VIEW
Advertising Campaign VIEW
Advertising planning process VIEW

 

Unit 3 Creative Strategy & Advertising Budget [Book]
Creative approaches VIEW
The art of copywriting VIEW
Advertising copy testing VIEW
Creativity in Advertising communication VIEW
Motivational Approaches & Appeals VIEW
Advertising Budget process VIEW VIEW
Methods of determining advertising Appropriation VIEW
VIEW VIEW VIEW

 

Unit 4 Advertising Media Strategy [Book]
Role of media, Types of Media, Their Advantages and Disadvantages VIEW
Media Research VIEW
Media Advertising Decisions VIEW
Media Planning VIEW VIEW
Media Selection VIEW
Media Scheduling VIEW VIEW
Media Strategies VIEW

 

Unit 5 Advertising Effectiveness & Organizing Advertising Functions [Book]
Methods of measuring advertising effectiveness VIEW VIEW
Advertising Research VIEW
Structure & Functions of an advertising agency VIEW VIEW
Selection of advertising agency VIEW
Co-ordination of advertising agency VIEW
Advertising regulations VIEW
Internet advertising VIEW VIEW
Bangalore University B.com Notes

AC 5.5 Advanced Accounting

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Unit 1 {Book}
Business of Banking companies VIEW
Some important provisions of Banking Regulation Act of 1949, Brokerage, Discounts, Statutory Reserves, Cash Reserves VIEW
Minimum capital and reserves, Restriction on commission VIEW
Books of accounts VIEW
Special features of bank accounting VIEW
Final Accounts, Balance Sheet and Profit and Loss account VIEW
VIEW
Interest on Doubtful debts VIEW VIEW
Rebate on bill Discounted VIEW
Acceptance, Endorsement and Other obligations VIEW
Problems as per new provisions

 

Unit 2 Accounts of Insurance Companies {Book}
(a) Life insurance: Accounting concepts relating to life insurance companies VIEW
Preparation of Final accounts of life insurance companies VIEW
Revenue account and Balance sheet VIEW
(b) General insurance: Meaning Accounting concepts VIEW
Preparation of Final accounts VIEW

 

Unit 3 Inflation Accounting {Book}
Need, Meaning, Definition Importance, Role, Objectives, Merits, and Demerits of Inflation Accounting VIEW
Problems on Current purchasing power method (CPP) VIEW
Current cost accounting method (CCA) VIEW

 

Unit 4 Farm Accounting  {Book}
Meaning, Need and Purpose, Characteristics of farm accounting VIEW
Nature of Transactions, Cost and revenue VIEW
Apportionment of common cost VIEW
By product costing VIEW
Farm Accounting, Recording of transactions, problems VIEW

 

Unit 5 Investment Accounting {Book}
Introduction, Nature of Investment Accounting VIEW
Investment Ledger VIEW
Different terms used; Cum dividend or Interest and ex- dividend or interest VIEW
Securities VIEW VIEW
Bonus Shares VIEW VIEW
Right Shares VIEW VIEW
Procedures of Recording shares VIEW
Bangalore University B.com Notes

Auditing and Reporting

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Unit 1 {Book}  
Auditing, Types of Audits, Advantages of Auditing VIEW
Differences between Accountancy and Auditing VIEW
Preparation before Commencement of New Audit VIEW
Audit Notebook VIEW
Audit Working Papers VIEW
Audit Program VIEW
Recent Trends in Auditing VIEW
Nature & Significance of Tax Audit VIEW
Cost Audit VIEW
Management Audit VIEW
Forensic Audit VIEW
Tally ERP 9 Auditors Edition: Introduction, Features, Characteristics VIEW
Tally.Net: Features, Requirements for remote connectivity Access information via SMS VIEW
Safeguard Data Automated Backup and Recovery VIEW
E-Auditing-meaning, uses and limitations VIEW
Auditing the Auditors VIEW

 

Unit 2 {Book}  
Internal Control VIEW
Internal Check Meaning, Objectives and Fundamental Principles VIEW
Internal Check as Regards VIEW
Wage Payments VIEW
Cash Sales VIEW
Cash purchases VIEW
Internal Audit Meaning, Advantages and Disadvantages of Internal Audit VIEW
Differences between Internal Check and Internal Audit VIEW
E- Applications in internal control and check VIEW

 

Unit 3 {Book}  
Vouching Meaning, Definition, Importance, Objective, Characteristics and Source VIEW
Routine Checking and Vouching VIEW
Voucher, Types of Vouchers VIEW
Vouching of Receipts: Cash Sales, Receipts from Debtors VIEW
Proceeds of the sale of Investments VIEW
Vouching of Payments: Cash Purchases VIEW
Payment to Creditors VIEW
Deferred Revenue Expenditure VIEW
E-Vouching, Uses and Limitations VIEW

 

Unit 4 {Book}  
Meaning and Objectives of verification and valuation VIEW
Position of an Auditor as regards the Valuation of Assets VIEW
Verification and Valuation of different Items: Land & Building, Plant & Machinery VIEW
Goodwill Investments VIEW
Stock in Trade VIEW
Liabilities and Bills Payable VIEW
Sundry Creditors VIEW
Contingent Liabilities VIEW

 

Unit 5 {Book}  
Company Auditor Appointment VIEW
Company Auditor Qualification VIEW
Powers, Duties and Liabilities VIEW VIEW
Professional Ethics of an Auditor VIEW
Audit of Educational Institutions VIEW
Audit of Insurance Companies VIEW
Audit of Cooperative Societies VIEW
Institutions for Auditing:  
Central Vigilance Commission (CVC) VIEW
Comptroller and Auditor General of India (CAG) VIEW
State Accountant and Auditor General (SAG) VIEW
Role and functions in Public Account Audits VIEW

 

Bangalore University B.com Notes

Cost Management

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Unit 1 Cost Control and Cost Reduction {Book}  
Meaning of Cost control and Cost Reduction VIEW
Areas covered by cost control and cost reduction VIEW
Product Design VIEW
Target costing VIEW
Value Analysis VIEW
Value engineering VIEW
Value chain analysis VIEW
Business Process Re- Engineering VIEW
Pareto Chart VIEW

 

Unit 2 Marginal Costing {Book}  
Absorption costing VIEW
Cost classification VIEW
Under Absorption Costing VIEW
Meaning and Definition of marginal costing VIEW
Absorption Costing V/s Marginal Costing VIEW
Need for Marginal Costing, Against and in favour of marginal costing VIEW
Marginal cost equation VIEW
Uses and Limitations of Marginal Costing VIEW
Break even analysis VIEW
Problems on Break Even Analyses VIEW

 

Unit 3 Standard Costing {Book}  
Historical costing VIEW
Introduction Meaning & Definition of Standard Cost and Standard Costing, Advantages & Disadvantages of Standard Costing VIEW
Preliminaries in establishing system of Standard Costing VIEW
Variance Analysis VIEW VIEW
Material Variance VIEW
Labour Variance VIEW
Overhead Variance VIEW
Problems on Material Variances and Labour Variances VIEW

 

Unit 4 Budgetary Control {Book}  
Introduction, Meaning & Definition of Budget and Budgetary Control VIEW
Objectives, Essential requirements, Advantages and Disadvantages of Budgetary Control VIEW
Meaning, Types of Functional Budgets VIEW
Meaning, Types of Flexible Budgets VIEW
Meaning, Types of Cash Budgets VIEW
Meaning, Types of Sales budget VIEW
Meaning, Types of Production budget VIEW
Problems on Flexible budgets and Cash budgets VIEW

 

Unit 5 Activity Based Costing {Book}  
Activity Based Costing, Weakness of conventional system concept of ABC VIEW
Kaplan and Cooper’s Approach, Cost drivers and cost pools VIEW
Allocation of overheads under ABC VIEW
Characteristics of ABC VIEW
Steps in the implementation of ABC VIEW
Benefits from adaptation of ABC system VIEW
Difficulties faced by the industries in the successful implementation of ABC VIEW

 

Bangalore University B.com Notes

Income Tax I

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Unit 1 Introduction to Income Tax {Book}
Brief history of Indian Income Tax VIEW
Legal Framework:
Types of taxes VIEW
Cannons of taxation VIEW
Definitions:
Assessment, Assessment year, Income, Agricultural income, Assesses, Person, Casual income VIEW
Previous year including exception VIEW
Gross total income, Total income VIEW
Scheme of taxation VIEW
Meaning and Classification of Capital and Revenue VIEW

 

Unit 2 Residential Status {Book}
Residential status of an Individual’s, Determination of Residential status VIEW
Incidence of tax-problems on computation of Gross total Income VIEW

 

Unit 3 Exempted incomes {Book}
Introduction, exempted incomes U/S 10. Only in the hands of individuals VIEW

 

Unit 4 Income from Salary {Book}
Meaning, definitions, basis of charge, Advance salary, Arrears of salary, encashment of earned leave VIEW
All allowances VIEW
Perquisites VIEW
Profits in lieu of salary VIEW
Provident fund VIEW
Gratuity VIEW VIEW
Commutation of pension VIEW
Deductions from salary U/S 16 VIEW
Problems on computation of Salary income VIEW

 

Unit 5 Income from House property {Book}
Income from House property VIEW
Basis of charge VIEW
Deemed owners, Composite rent VIEW
Exempted income from house property VIEW
Annual value VIEW
Determination of Annual value, treatment of unrealized rent, loss due to Vacancy, Deductions from Annual value U/S 24 VIEW
Problems on computation of income from house property VIEW

 

Bangalore University B.com Notes / Bangalore University BBA Notes

Depositories in Stock Market

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In India, a Depository Participant (DP) is described as an Agent of the depository. They are the intermediaries between the depository and the investors. The relationship between the DPs and the depository is governed by an agreement made between the two under the Depositories Act. In a strictly legal sense, a DP is an entity who is registered as such with SEBI under the sub section 1A of Section 12 of the SEBI Act. As per the provisions of this Act, a DP can offer depository-related services only after obtaining a certificate of registration from SEBI. As of 2012, there were 288 DPs of NSDL and 563 DPs of CDSL registered with SEBI.

SEBI (D&P) Regulations, 1996 prescribe a minimum net worth of Rs. 50 lakh for stockbrokers, R&T agents and non-banking finance companies (NBFC), for granting them a certificate of registration to act as DPs. If a stockbroker seeks to act as a DP in more than one depository, he should comply with the specified net worth criterion separately for each such depository. No minimum net worth criterion has been prescribed for other categories of DPs; however, depositories can fix a higher net worth criterion for their DPs.

Basics of Depository

Depository is an institution or a kind of organization which holds securities with it in De-Mat form, in which trading is done among shares, debentures, mutual funds, derivatives, F&O and commodities. The intermediaries perform their actions in variety of securities at Depository on behalf of their clients. These intermediaries are known as Depositories Participants (DPs). Fundamentally, there are two sorts of depositories in India. One is the National Securities Depository Limited (NSDL) and the other is the Central Depository Service (India) Limited (CDSL). Every Depository Participant (DP) needs to be registered under this Depository before it begins its operation or trade in the market.

Demat Account Opening

A demat account is opened on the same lines as that of a Bank Account. Prescribed Account opening forms are available with the DP, needs to be filled in. Standard Agreements are to be signed by the Client and the DP, which details the rights and obligations of both parties. Along with the form the client requires to attach Photographs of Account holder, attested copies of proof of residence and proof of identity needs to be submitted along with the account opening form.

In case of Corporate clients, additional attachments required are true copy of the resolution for Demat a/c opening along with signatories to operate the account and true copy of the Memorandum and Articles of Association is to be attached.

Services provided by Depository

  • Dematerialisation (usually known as demat) is converting physical certificates of Securities to electronic form
  • Rematerialisation, known as remat, is reverse of demat, i.e. getting physical certificates from the electronic securities
  • Transfer of securities, change of beneficial ownership
  • Settlement of trades done on exchange connected to the Depository
  • Pledging and Unpledging of Securities for loan against shares
  • Corporate action benefits directly transfer to the Demat and Bank account of customer

No. of Depository in the country

Currently there are two depositories operational in India.

  • National Securities Depository Ltd. – NSDL – Having 2 crores Demat A/c as on 30-06-2020
  • Central Depository Services Ltd. – CDSL – Having 2.3 crores Demat A/c as on 30-06-2020

Depositories Act 1996

The definition of depositories under the Depositories Act, 1996 is that a “depository” is a company registered under the Companies Act, 1956. It would be granted a certificate of registration under Section 12 subsection (1A) of Securities and Exchange Board of India Act (SEBI), 1992. Hence the Depository becomes an organization like a central bank.  The main role of Depositories is to dematerialize the securities which mean converting the securities from physical form to electronic form and enabling transactions in electronic form. The depository needs to obtain a certificate of commencement of business from SEBI. At present two Depositories are functioning in India:

  • National Securities Depository Limited (NSDL)
  • Central Depository Services (India) Limited (CDSL)

Depository Participant (DP)

The Depository Participant is the link between the owner of the securities and the depositors. He is deemed to be an agent of the depository. Accordingly, he is authorized to offer depository services to investors. As per SEBI regulations and Depository Act, a depository cannot interact directly with beneficial owners. He has to deal with its agents called Depository Participant. Neither can the investors directly approach the depository for any services. They have to interact through the DP.

Services provided by a depository

The following services are provided by a depositor through a DP:

  1. Opening a Demat Account

The first step is to open a Demat Account. Demat Account is the short form for Dematerialisation Account. It is the process of holding investments like mutual funds, shares, bonds, government securities, etc. It does away with the hassles of maintenance of physical documents.

  1. Dematerialization

This process is the conversion of physical shares to electronic shares. When a shareholder uses this facility, the Company takes back the physical shares through the depository system and equal numbers of shares are credited into the shareholder’s account.

  1. Rematerialization

This is the exact opposite of Dematerialization. Here physical securities are issued in place of securities in electronic form. 

  1. Other services

Pledging Dematerialized shares

Dematerialized shares can be pledged. After the loan is repaid a request can be made through one’s DP to close the pledge through a standard format.

Initial Public Offerings

Public offer credits can be directly received into the Demat account.

Receipt of cash/non-cash benefits

When rights or bonus or dividend is announced by any corporate event for a particular security, the depository will give the details of all the clients having electronic holdings to the registrar as on that date. The registrar will then calculate the benefits due to all the shareholders.

Stock lending and borrowing

Securities in the Demat form can be easily lent/ borrowed. Instructions are to be given to DP through a standard format (which is available with DP).

Transmission of securities

In case there is a need for transmission of securities due to death, lunacy, bankruptcy, insolvency, or by any other lawful means, it is possible through the depository system. The claimant will have to fill in a transmission request form supported by valid documents.

Freezing Account with DP

If at any time one wishes that no transaction should be effected in one’s account, one may advise one’s DP accordingly. DP will freeze the account of the investor until further instructions.

Dematerialization process

  1. Appointing DP

The investor chooses a DP of his choice and opens an account with him.  The process will be just like opening an account with a bank. The Investor gets an identification number called Client ID. This is just like the bank account number. This no is the reference point for all transactions with DP. Every investor with the help of a DP has to agree with a depository to get his holding dematerialized. This step is necessary whether an investor already has securities or securities are yet to be issued in a fresh issue.

  1. “Demat” Request

The investor makes an application to DP’s in a form called Dematerialisation Request Form is known as DRF.  This form is provided by the DP, the investor hands over his share certificates after cancelling them in writing. The certificates are then surrendered to get dematerialized for Demat. The DP will accept certificates registered only in the investor’s name.

  1. Verification and confirmation by Registrar

The depository electronically intimates the issuer or its Registrar of the dematerialization request. The issuer or the Registrar has to verify the security certificates. He also has to verify that the DRF has been made by the person recorded as a member in its Register of Members. Once the Registrar is satisfied, it dematerializes the scrip and updates its record. The Registrar then authorizes electronic credit for that security in the investor’s favour and informs the depository of the same.

  1. Crediting the Client’s Account

The investor’s account is credited by DP with the number of shares dematerialized. After this, the investor holds the securities in electronic form. The investor gets the information in the form of a statement.  However, in case, there is a rejection then such credit is not given.

Features of the Depository System in India

  1. Securities in dematerialized form

The depository model is more or less similar to holding funds in bank accounts. Transfer of ownership of securities is done through simple account transfer. This method is simpler and avoids cumbersome paperwork.

  1. Fungibility

Fungibility means an asset can be interchanged with another asset of a similar type. The dematerialized securities are not identified by share certificate numbers. Hence all securities which are in the same class can be interchanged.

  1. Registered and beneficial owner

There are two types of ownership of securities. One is a registered owner and the other is a beneficial owner. For all the dematerialized securities, NSDL is the registered owner but ownership rights, duties and liabilities are with beneficial owners.

  1. Easy transferability of shares

The transfer takes place freely through the electronic system and dispenses the procedural formalities related to paperwork.

  1. No stamp duty

For the transfer of physical shares, then the stamp duty of 0.5% is payable on the market value of the shares. However, there is no such duty on the electronic form.

  1. No risk

Physical certificates have issues like loss in transit, theft, bad deliveries, etc. There is hardly any risk involved in the electronic system as compared to physical certificates.

Management Notes

Private placements of Shares

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Private placement, the issue is placed directly with a few selected small number of investors. This is also known as non-public offering. Typical investors include large banks, mutual funds, insurance companies and pension funds. The private placement does not have to be registered with the Securities and Exchange Commission.

Private placements are much cheaper than IPOs. However, this method cannot be used for large issues because a small group of investors will have limited risk appetite. Also, these issues are not traded in the secondary market, as opposed to IPO securities, which once listed are traded in the secondary market. This makes it difficult for investors to liquidate these securities.

The term private placement refers to the sale of securities to a small number of private investors to raise capital. These private investors include mutual fund investors, banks, insurance companies and etc. Private placements are different from public issue since in the latter one the shares are sold in the open market to anyone willing to buy them whereas in private placements of shares the shares are sold to specific investors.

Private placement is a method of raising capital in which securities are sold directly to a selected group of investors rather than through a public offering. This targeted approach allows companies to raise funds from a specific set of investors, often institutions or high-net-worth individuals, without the need for public registration. Private placements are regulated by securities laws, and the process involves meticulous planning, compliance, and negotiations between issuers and investors.

Private placement is a valuable tool for companies seeking to raise capital efficiently while maintaining a degree of confidentiality. It provides flexibility in structuring deals, selecting investors, and tailoring terms to meet specific needs. While private placements may not be suitable for all companies, they offer a strategic avenue for raising capital, attracting strategic partners, and fueling growth in a controlled and efficient manner. Companies considering private placements should carefully assess their capital needs, regulatory obligations, and strategic goals before engaging in this form of capital raising.

Features of Private Placement:

  1. Limited Investor Pool:

Private placements involve a restricted number of investors. This targeted approach allows issuers to negotiate terms with a select group, often chosen based on their strategic alignment with the company’s goals.

  1. Exemption from Public Registration:

Unlike public offerings, private placements are exempt from the rigorous public registration process. This exemption is provided under various securities regulations, such as Regulation D in the United States or the SEBI (Securities and Exchange Board of India) guidelines in India.

  1. Negotiable Terms:

Issuers and investors have more flexibility in negotiating the terms of the private placement. This includes aspects such as pricing, the structure of securities, and any covenants or conditions attached to the investment.

  1. Diverse Securities:

Private placements can involve a variety of securities, including equity, debt, convertible securities, or preferred shares. The choice of security depends on the company’s capital needs and the preferences of investors.

  1. Customized Agreements:

The terms and conditions of private placement agreements are often customized to suit the specific needs of both parties. This flexibility allows for tailoring the investment structure to align with the company’s strategy.

  1. Confidentiality:

Private placements offer a level of confidentiality that is not present in public offerings. Companies can raise capital without disclosing sensitive information to competitors or the broader market.

Regulatory Framework for Private Placement:

While private placements offer flexibility, they are subject to regulatory oversight to protect the interests of investors. The regulatory framework varies by jurisdiction, but common elements:

  1. Accredited Investors:

Many jurisdictions restrict private placements to accredited investors, who are deemed to have the financial sophistication to understand and assess the risks associated with these investments.

  1. Exemptions from Registration:

Private placements are exempt from the full registration requirements that public offerings must undergo. However, issuers must comply with specific regulations governing private placements.

  1. Disclosure Requirements:

While private placements provide confidentiality, issuers are still required to provide certain disclosures to investors. These disclosures may include financial statements, risk factors, and other relevant information.

  1. Limited Marketing and Solicitation:

The solicitation of investors in a private placement is limited compared to public offerings. Issuers must be cautious in their approach to avoid violating regulations related to marketing and advertising.

  1. Resale Restrictions:

Investors in private placements may face restrictions on selling their securities in the secondary market. These restrictions help maintain the private nature of the placement.

Advantages of Private Placement:

  1. Efficiency and Speed:

Private placements are generally faster and more cost-effective than public offerings. The absence of extensive regulatory reviews and public registration processes accelerates the capital-raising timeline.

  1. Selective Investor Engagement:

Issuers can choose investors strategically, targeting those with industry expertise, strategic alignment, or specific financial capabilities.

  1. Flexibility in Terms:

The negotiated nature of private placements allows issuers to tailor terms and conditions to meet the specific needs and goals of both the company and investors.

  1. Confidentiality:

Private placements offer a level of confidentiality, allowing companies to raise capital without divulging sensitive information to the public.

  1. Strategic Alignment:

By selectively choosing investors, companies can attract strategic partners who bring not just capital but also industry knowledge, networks, and expertise.

  1. Lower Costs:

The costs associated with private placements are generally lower than those of public offerings due to reduced regulatory requirements and marketing expenses.

Challenges and Considerations:

  1. Limited Capital:

Private placements may not be suitable for companies seeking significant amounts of capital, as the investor pool is restricted.

  1. illiquidity for Investors:

Investors in private placements may face challenges in selling their securities, as these transactions are often subject to restrictions.

  1. Regulatory Compliance:

Companies must navigate complex regulatory requirements to ensure compliance with securities laws. Failure to comply can result in legal consequences.

  1. Market Perception:

Companies choosing private placements may miss out on the visibility and market perception that comes with a public offering.

  1. Negotiation Complexity:

Negotiating terms with a select group of investors can be complex, requiring skilled negotiation and legal expertise to strike a mutually beneficial deal.

Provisions as per Companies Act

(1) A company may, subject to the provisions of this section, make a private placement of securities.

(2)  A private placement shall be made only to a select group of persons who have been identified by the Board (herein referred to as “identified persons”), whose number shall not exceed fifty or such higher number as may be prescribed [excluding the qualified institutional buyers and employees of the company being offered securities under a scheme of employees stock option in terms of provisions of clause (b) of sub-section (1) of section 62], in a financial year subject to such conditions as may be prescribed.

(3) A company making private placement shall issue private placement offer and application in such form and manner as may be prescribed to identified persons, whose names and addresses are recorded by the company in such manner as may be prescribed.

Statutory Provisions for Private Placement of Securities:

Private Placement of Securities is covered under Section 42 of the Companies Act, 2013 and Companies (Prospectus and Allotment of Securities) Rules, 2014. Private Placement is defined as any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through Private Placement Offer-cum-Application.

To whom can a Private Placement offer be made:

Private Placement Offer can be made to a prospective investor or any person who intends to invest a specific amount of funds in the Company against issue of securities. Offer to subscribe for the securities of a Company under Private Placement cannot be made to more than 200 persons in a Financial Year. If a company, listed or unlisted, makes an offer to allot or invites subscription, or allots, or enters into an agreement to allot, securities to more than the prescribed number of persons, same shall be deemed to be an offer to the public.

Advertisement:

No advertisements, media marketing or distribution channels or agents to be used by the company to inform the public at large about such an issue.

Procedure:

Following procedure should be followed by the Company intending to issue securities under Private Placement:

  • Calling for the meeting of the Board of Directors of the Company to offer securities on Private Placement Basis.
  • Passing of Board Resolution for issue of shares under Private Placement to specified persons and calling for Extra-Ordinary General Meeting of the Company to take members approval.
  • Filing form MGT-14- Board Resolution for issue of shares under Private Placement.
  • Issuing notices to the shareholders for Extra-Ordinary General Meeting of the Company as per timelines or with shorter consents.
  • Passing Special Resolution in the Shareholders meeting for issue and allotment of shares under Private Placement.
  • Sending Offer cum Application Letters in form PAS-4 to identified persons within 30 days of recording the names of the identified persons. Such Offer cum Application Letters can be sent in electronic mode (emails) or by post.
  • Receiving allotment amount in a separate bank account within the offer period as mentioned in the Offer cum Application Letter.
  • The Company shall allot shares to the applicants who has subscribed for the same through application letter and deposited the subscription amount within the offer period.
  • After Closure of Offer Period call a Board Meeting and pass Resolution for Allotment of Securities to the entitled subscribers.
  • Filing of return of allotment in Form PAS-3 within 15 days from the date of the allotment i.e. After passing Board Resolution for allotment
  • Make sure the securities are allotted within 60 days of the receipt of Application amount by the Company.
  • Stamp Duty on allotment shall be paid @ 0.10% through channels as available in respective states. e.g. In Mumbai it can be paid to ESBTR or GRASS MAHAKOSH site
  • The Company will be allowed to utilize the money raised through Private Placement only after Return of Allotment in Form PAS-3 is filed with the Registrar of Companies.
  • Record of Private Placement should be maintained by the Company in prescribed Form PAS-5.
  • The Company should update its Registrar of Members in a proper manner upon completion of allotment.
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