How to invest in Private Limited Company through Shareholding?

By Trademark Bazaar - 11th January 2018

How to invest in Private Limited Company through Shareholding?

Private limited company is emerging as one of the most preferred form of business in India.Private limited company is more suitable for the entrepreneurs who want to incorporate a medium scale Business entity without any interference of the outsider’s i.e. public at large. The private limited company is prohibited to raise funds from the public at large. Thus it often becomes difficult for the private limited company to raise capital.

For the Initial investment in the private limited company the Group of persons called promoters can together register Private Limited Company by way of subscription to Memorandum of Association (MoA) while online company registration procedure.  The subscribers to the memorandum of association of private limited become the shareholders of the company.

Further the shareholding in the private limited company can be obtained through following means

ESOP-Employee Stock Option Plan (ESOP) is the option provided to employees of a company to purchase the shares of the company at a future date at pre-determined prices.  ESOP are issued to employees to raise their morale and motivate them for being the part of the company.

Private Placement-A private limited company is empowered to make private placements as an option for further issue of shares and increase investment in the companies. Private Placement refers to the offering of securities to a selected group of persons by the company other than by the way of the public offer. The crucial condition to be fulfilled for private placements is that under a Private Placement Offer Letter cannot be made to more than 200 people.

Right issue/Preferential Issue –Right issue is an option made to the company's existing security holders to buy additional shares. With the issued rights, existing security-holders have the privilege to buy a specified number of new securities from the issuer at a specified price within a subscription period.

Bonus Issue - Bonus shares are additional shares given to the present shareholders for no additional cost based on the number of shares held by the shareholder. Announcing a share bonus can help a company capitalize a part of its reserves and surplus and/or reduce the price of shares, thereby increasing its marketability. Issuing Bonus shares is the most feasible option for every private limited company.

 

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