Companies Act Section 23 — Public offer and private placement
CHAPTER III PROSPECTUS AND ALLOTMENT OF SECURITIES
Commercial / Corporate
Summary
Sub-section (1) explains the three ways a public company can issue securities. Under clause (a), it can offer securities to the general public through a document called a prospectus, which is referred to as a public offer, as long as it follows the rules in this Part of the Act. Under clause (b), it can issue securities through a private placement, which means offering them to a select group rather than the public, by following the rules in Part II of this Chapter. Under clause (c), it can issue securities through a rights issue or a bonus issue, which are ways of giving shares to existing shareholders, in line with this Act, and if the company is listed or plans to list its securities, it must also follow the Securities and Exchange Board of India Act, 1992 and the rules made under it.
Sub-section (2) covers how a private company can issue securities. Under clause (a), it can do so through a rights issue or a bonus issue in accordance with this Act. Under clause (b), it can issue securities through a private placement by following the rules in Part II of this Chapter.
Sub-section (3) states that certain classes of public companies, as may be prescribed by rules, can issue certain classes of securities for the purpose of listing on permitted stock exchanges in foreign jurisdictions or other jurisdictions that may be prescribed.
Sub-section (4) says that the Central Government can, through a notification, exempt any class or classes of public companies mentioned in sub-section (3) from any of the provisions of this Chapter, Chapter IV, section 89, section 90, or section 127. It also says that a copy of every such notification must be laid before both Houses of Parliament as soon as possible after it is issued.
The explanation at the end clarifies that for this Chapter, the term public offer includes an initial public offer or a further public offer of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, all through the issue of a prospectus.
Official Text
(1) A public company may issue securities—
(a) to public through prospectus (herein referred to as “public offer”) by complying with the provisions of this Part; or
(b) through private placement by complying with the provisions of Part II of this Chapter; or
(c) through a rights issue or a bonus issue in accordance with the provisions of this Act and in case of a listed company or a company which intends to get its securities listed also with the provisions of the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules and regulations made thereunder.
(2) A private company may issue securities—
(a) by way of rights issue or bonus issue in accordance with the provisions of this Act; or
(b) through private placement by complying with the provisions of Part II of this Chapter. 5[
(3) Such class of public companies may issue such class of securities for the purposes of listing on permitted stock exchanges in permissible foreign jurisdictions or such other jurisdictions, as may be prescribed.
(4) The Central Government may, by notification, exempt any class or classes of public companies referred to in sub-section (3) from any of the provisions of this Chapter, Chapter IV, section 89, section 90 or section 127 and a copy of every such notification shall, as soon as may be after it is issued, be laid before both Houses of Parliament.] Explanation.—For the purposes of this Chapter, “public offer” includes initial public offer or further public offer of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, through issue of a prospectus.