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.
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