Sometimes the promoters of a public company are confident of raising capital through private sources and contacts. In such cases, the company does not invite the public to subscribe for it shares but make private placement of shares to promoters, their friends, their relatives etc.
When the shares are not offered to the public, the company need not issue a prospectus but issue a ‘statement in lieu of prospectus’ and must file it with the registrar at least 3 days before first allotment of either share or debenture. In case of private placement of shares, shareholders can’t sell their shares within ‘Lock-in period’.
