Private Placement Compliance: The Bangalore Founder’s Legal Playbook:

You just got 15 investors who love your B2B SaaS product. You send out a WhatsApp broadcast with your pitch deck. Boom. You have just committed a crime under Section 42 of the Companies Act.

Private placement is not an informal thing in India. It’s very structured. The moment you publicly “solicit” you lose the exemption. Let's get your process right before your lawyer calls.

The Two Forms That Save Your Life (PAS-4 & PAS-3)

Most founders screw up the paperwork, not the pitch. This is your guide to survival.

Form PAS-4 - Letter of Offer

You have to file this before you make any offer.” It has:

• The amount of securities

• The price (or price formula)

• Names of all allottees (including prospective allottees)

• A statement that no advertising of a general nature is used

Bangalore pro tip: You should still file PAS-4 with the RoC (Bengaluru) even if you do not end up raising. It costs zero penalties, but leaves a clean audit trail.

Form PAS-3 – The Return of Allotment

Due within 15 days of issuing shares. Late submission? Penalty Rs. 1,000/- per day. We have seen Whitefield start-ups being fined ₹3 Lakhs just to miss this by 3 months.

The Infamous 200-Investor Trap

The limit is 200 investors in any 12-month rolling period. Note: Not per game. Per fiscal year.

What does count towards the limit?

• Personally, one angel investor per person

• Body corporates (each company = 1, no matter what its own shareholders are)

• Trusts (1 trust=1)

What doesn’t count?

• Employees under ESOP scheme (separate exemption)

• Banks and financial institutions (if they are the only category)

Real Life Consequence: A Bengaluru Edtech startup raised from 210 people in 3 consecutive placements. SEBI made sure that the whole amount of ₹12 Crore was refunded. The company was bust in under 9 months.

Practical Checklist Before Your Next Close

• Did you submit PAS-4 before the first offer letter?

• Do you have less than 200 investors on your list (repeat investors included)?

• Did each investor pay from their own bank account (no checks from third parties)?

• Do you have money in a different bank account (not your operational one)?

• Have you filed PAS-3 within 15 days of allotment?

Conclusion: Compliance Is Your Competitive Advantage

Bangalore investors speak out. If you have a clean cap table and timely ROC filings you’re going to raise again. If not, news spreads faster than a Product Hunt launch.

Looking for a Private Placement Offer Letter that is SEBI compliant? Please click here to view our auditor reviewed document pack.