PAS-3 Return of Allotment: The 15-Day Filing That Quietly Costs Startups Up to Rs 25 Lakh (Section 39 & 42 Guide 2026)

PAS-3 Return of Allotment: The 15-Day Filing That Quietly Costs Startups Up to Rs 25 Lakh

By CS Sapna Malpani, Practising Company Secretary, Bangalore · Last updated 31 July 2026

On 30 January 2024, the Registrar of Companies at Chandigarh signed an order against Tridib Industries Limited and imposed a penalty of about Rs 16 lakh. The company had done nothing dramatic. It raised money on private placement, used the funds, and then handled the return of allotment paperwork loosely. Two years later, on 5 March 2026, an ROC adjudicating officer fined another company for filing a single PAS-3 return of allotment just 46 days late after allotting 681 preference shares to a fund. Same form, same mistake, two separate penalty orders. If your company has raised a round, issued ESOP shares, or converted a loan into equity, PAS-3 is the filing that decides whether that allotment is clean or a due-diligence landmine.

Why one late form derails a funding round

PAS-3 is the return a company files with the Registrar to report that it has allotted securities. It records who received shares, how many, at what price, and against what consideration. The form sits at the end of every capital-raising exercise. Rights issue, preferential allotment, private placement to a venture fund, ESOP exercise, conversion of a compulsorily convertible instrument, bonus issue: each one ends with a PAS-3.

Founders treat it as a back-office formality, and that is exactly why it hurts. The Registrar has been running targeted adjudication drives on private placement and allotment filings. The Tridib Industries order shows how a small company that self-reported its own lapses still walked away with a penalty near Rs 16 lakh across Sections 42(4), 42(5), and 42(6). The March 2026 order shows the Registrar acting on a plain 46-day delay with no fraud, no complaint, and a company that filed a suo-motu application admitting the slip.

The commercial damage runs deeper than the fine. An unfiled PAS-3 means the allotment is not reflected in the Registrar’s records, the company cannot cleanly issue share certificates in Form SH-1, and the cap table does not reconcile with the MCA master data. When a Series A investor’s counsel pulls the MCA filings and finds allotments that were never returned, the round slows while lawyers paper over the gap with rectification filings and board confirmations. A missing form on a Rs 2 crore raise is not a Rs 1,000 problem. It is a four-week delay at the worst possible moment.

What the law actually says

Two sections carry PAS-3, and they carry very different penalties. Reading them together is where founders and even some finance teams get caught.

Section 39(4) of the Companies Act, 2013 requires a company making any allotment of securities to file a return of allotment within 30 days, as prescribed under Rule 12 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. Section 39(5) sets the penalty: for a default, the company and every officer in default are liable to “one thousand rupees for each day during which such default continues or one lakh rupees, whichever is less.” That Rs 1 lakh ceiling is the softer of the two regimes.

Section 42(8) covers the private placement route and shortens the window to 15 days. Section 42(9) reads, in the Act’s own words: a defaulting company, “its promoters and directors shall be liable to a penalty for each default of one thousand rupees for each day during which such default continues but not exceeding twenty-five lakh rupees.” The daily rate is identical, but the cap is 25 times higher, and it reaches promoters and directors personally, not just the company.

There is a relief valve. Section 446B gives one person companies, small companies, start-up companies, and producer companies a lesser penalty: not more than one-half of the amount specified, subject to a maximum of Rs 2 lakh for the company and Rs 1 lakh for an officer in default. A DPIIT-recognised start-up qualifies, which is why the effective exposure for a young company is usually the Rs 2 lakh band rather than the full Rs 25 lakh. The Tridib order applied exactly this concession and still totalled about Rs 16 lakh across three separate contraventions.

The 2026 orders that should worry founders

Two adjudication orders tell the story better than any warning.

Tridib Industries Limited (ROC Chandigarh, order dated 30 January 2024). During FY 2023-24 the company ran two private placements. It used the money before allotment, skipped the separate escrow-style bank account required for private placement funds, and made a fresh offer before completing the earlier one. The adjudicating officer recorded contraventions of Section 42(4), 42(5), and 42(6), applied the small-company concession under Section 446B, and still landed a penalty near Rs 16 lakh. The company had filed one PAS-3 correctly. The penalty came from the surrounding private placement discipline it ignored.

The 5 March 2026 order. A company allotted 681 partly paid compulsorily convertible preference shares to an investment fund on 13 September 2024. Section 42 required the PAS-3 within 15 days. The company filed on 14 November 2024, a delay of 46 days. There was no fraud and no complaint. The company filed a suo-motu adjudication application admitting an inadvertent delay, and the Registrar imposed a penalty anyway. A single form, filed six weeks late, with a full confession, still drew a fine.

The pattern is consistent. As one commentary on the Registrar’s recent drive put it, ROCs now show “vigilance on private placement provisions.” Self-reporting reduces the number but does not erase the penalty. The Registrar treats the 15-day and 30-day windows as hard lines.

How to file PAS-3 correctly, step by step

The mechanics are not hard once the sequence is clear. The order of events matters as much as the form itself.

1. Pass the allotment resolution. The board allots the securities by resolution and records the allottee list. The allotment date is this resolution date. For a private placement, the allotment must happen within 60 days of receiving the application money, or the money is refunded within 15 days after that.
2. Do not spend the money first. On a private placement, funds sit in a separate bank account and cannot be used until allotment is made and PAS-3 is filed. Utilising money before the return is filed is the exact Section 42 breach that cost Tridib Industries its penalty.
3. Assemble the attachments. PAS-3 needs the list of allottees, the board resolution, and the valuation report from a registered valuer where the issue is not at face value. For a foreign investor, the FEMA pricing certificate under Rule 21 must support the price too.
4. File within the window. Upload eForm PAS-3 on the MCA V3 portal within 15 days for private placement or 30 days for other allotments. The form is filed under Section 39(4) and 42(9) read with Rules 12 and 14. It is a linked filing, so keep the SRN of the related PAS-4 or offer letter handy.
5. Update the statutory registers. Enter the allotment in the register of members and, where relevant, the register of debenture holders, then issue share certificates in Form SH-1 within two months of allotment.
6. Reconcile the cap table. Match the post-allotment shareholding against the MCA master data and the company’s own cap table so a future investor’s counsel finds no gap.

The common errors that trigger penalties are predictable: counting the 15 or 30 days from the funding date instead of the resolution date, filing PAS-3 for a private placement on the 30-day assumption, missing the valuation report, and using investor money before the return is filed. Each one is avoidable with a checklist and a calendar reminder set on the day the board resolves the allotment.

The deeper implication

According to CS Sapna Malpani, the PAS-3 problem is rarely about the form and almost always about sequencing. Founders close a round, the money arrives, the team starts spending, and the return of allotment slides down the list until a diligence request surfaces it months later. By then the delay is fixed and the penalty is arithmetic. The companies that stay clean treat the allotment resolution as the trigger for a 15-day sprint, not a 15-day suggestion.

The likely direction of travel is more scrutiny, not less. The MCA V3 portal now links allotment filings to the underlying offer letters and valuation data, which makes a missing or inconsistent PAS-3 easy for the system to flag. Expect the Registrar’s adjudication drives on Section 42 to keep widening, and expect diligence teams to pull the full allotment history as standard. A start-up that has filed every PAS-3 on time is telling an investor something true about how it runs, before a single term sheet is signed.

PAS-3 versus the forms founders confuse it with

PAS-3 gets mixed up with three neighbours. PAS-4 is the private placement offer letter sent to identified investors before allotment; PAS-3 is the return filed after. MGT-14 registers the board or shareholder resolution that authorised the issue and, for certain allotments, must be filed alongside. FC-GPR is the separate RBI reporting on the RBI FIRMS portal when the allottee is a foreign investor, and it runs on its own 30-day clock in parallel with PAS-3. Filing PAS-3 does not discharge the FC-GPR obligation, and vice versa. A round funded by an overseas fund triggers both, plus the FEMA valuation certificate, plus MGT-14 where a special resolution was passed. Missing any one of them leaves a hole a diligence team will find.

Sources and references

• Section 39, Companies Act 2013, Allotment of securities by company — IndianKanoon and CA2013.com
• Section 39, IBC Laws bare text — ibclaw.in
• eForm PAS-3 Instruction Kit, Ministry of Corporate Affairs — mca.gov.in
• Tridib Industries Limited, ROC Chandigarh adjudication order dated 30 January 2024 (Rs 16 lakh, Section 42) — Taxguru
• ROC adjudication order dated 5 March 2026, 46-day PAS-3 delay on 681 CCPS — Studycafe and Taxguru
• ROC vigilance on private placement provisions — MMJC
• PAS-3 for privately placed issuance — Vinod Kothari Consultants

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