Preferential issue_ICDR Regulations

2(z) of ICDR Regulation defines preferential issue as:-

“preferential issue” means an issue of specified securities by a listed issuer to any select person or group of persons on a private placement basis and does not include an offer of specified securities made through a public issue, rights issue, bonus issue, employee stock option scheme, employee stock purchase scheme or qualified institutions placement or an issue of sweat equity shares or depository receipts issued in a country outside India or foreign securities;

Companies Act, 1956 Section 81 (1A) provides for issue of shares to persons other than existing shareholders.

[ Notwithstanding anything contained in sub- section (1), the further shares aforesaid may be offered to any persons[ whether or not those persons include the persons referred to in clause (a) of subsection (1)] in any manner whatsoever-

(a) if a special resolution to that effect is passed by the company in general meeting, or

(b) where no such special resolution is passed, if the votes cast (whether on a show of hands, or on a poll, as the case may be) in favour of the proposal contained in the resolution moved in that general meeting (including the casting vote, if any, of the Chairman) by members who, being entitled so to do, vote in person, or where proxies are allowed, by proxy, exceed the votes, if any, cast against the proposal by members so entitled and voting and the Central Government is satisfied, on an application made by the Board of directors in this behalf, that the proposal is most beneficial to the company.]