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Section 23 of the Companies Act, 2013 prescribes the manner in which a public and private company may issue securities. Under the law, a public company can issue its securities by issuing a prospectus, otherwise known as 'public offer'.
Public company means any company which satisfies the following conditions-
It has a minimum paid-up share capital of Rs. 5 lakhs or more. It is not a private company.
A subsidiary company of a public company will also be a public company even if it continues to be a private company in its Articles.
Section 2(70) of the Act defines ‘prospectus’ as any document described or issued as a prospectus and includes a red herring prospectus, shelf prospectus, any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.
There can be two types of public offer-
Initial Public Offer- It is the first offer made by a company to the public. Initial public offer is usually made to raise capital of a small scale company to expand it. Further Public Offer- It is issuing shares to investors by a company already listed on a stock exchange. It is a stock issue of extra shares made by a public company that has already gone through its initial public offer process.
The public offer can be made by the company as well as the existing shareholders either as a fresh issue of securities or as an offer for sale. A fresh issue of securities is the issue of shares by the company to the public, whereas an offer for sale is the proposal by existing shareholders to sell their shares. Need corporate legal advice? Hire the best corporate lawyers from MyAdvo. Email us at firstname.lastname@example.org or call now at 9811782573.