Objectives & Agenda : One of the primary and popular forms of raising money by a public company is by way of offer of securities to public. Private Companies are prohibited to invite the public to subscribe for any securities of the company. Such issue enables a company to raise funds from large number of investors. The webinar covers the aspects of overview on public issue, issue of prospectus, various types of prospectus, statutory provisions in the Companies Act, 2013, compliance aspects and judicial precedents.

1. Public issue of shares
CS Meenakshi Jayaraman

2. Credits and Acknowledgments
Sundar Rajan S

3. Legends used in the Presentation
Act Companies Act, 2013
BOD Board of Directors
CA Chartered Accountant
CG Central Government
CS Company Secretary
Demat Dematerialisation
IEPF Investor Education and protection Fund
IPO Initial Public Offer
ISIN International Security Identification Number
RSE Recognised Stock Exchange
RTA Registrar to an issue and share transfer agent
Rule Companies (Prospectus and Allotment of Securities) Rules
SCRA Securities Contract Regulation Act
SEBI Securities and Exchange Board of India
UPC Unlisted Public Company

4. Presentation Schema
Types of issue of
shares
Issue by public and
private Company
Public issue Issue of prospectus
Types of prospectus
Offer of sale to
public by certain
members
Matters to be stated
in prospectus
Variation in terms of
prospectus
Public offer of
securities in demat
form
Advertisement of
prospectus
Securities to be
dealt with in Stock
Exchanges
Judicial Precedents

5. Types of issue of shares
Issue of shares
Public issue
Private
placement
Bonus issueRights issue

6. Issue by public and private Companies
Public Company Private Company
Public issue
Private placement
Rights and bonus
issue

7. Public issue or public offer
Public offer includes
Initial public offer
Further public offer
Offer for sale of securities to the public by an
existing shareholder
Through issue of prospectus
In simple terms, issue of shares to the general public by way of prospectus is termed as public issue

8. Meaning of relevant terms
• Issue of securities to the public for the first time by the CompanyInitial public offer
• Issue of securities to the public for the subsequent times by the
Company after IPO
Further public offer

9. Power of SEBI to regulate issue and transfer of
securities
In case of listed Companies or those Companies with the intention of listing on a RSE in India
The following provisions shall be administered by SEBI
1. Chapter III – Prospectus and Allotment
2. Chapter IV – Share capital and debentures
3. Section 127 – Punishment for failure to distribute dividends
To the extent* they relate to:
a. issue and transfer of securities and
b. non-payment of dividend
*In any other case, such provisions shall be administered by the CG

10. Issue of prospectus
• Means any document
• Described or issued as prospectus and
• Includes a red herring prospectus or shelf prospectus or
• Any notice, circular, advertisement or other document
• inviting offers from the public for the subscription or purchase
of any securities of a body corporate
Prospectus
Issue of prospectus is mandatory for a public issue
There are various types of prospectus that can be issued by a Company to the public

11. Types of prospectus
Prospectus
Abridged prospectus
Shelf prospectus
Red herring prospectus
Deemed prospectus

12. Deemed prospectus – Section 25
When a Company allots or agrees to allot any securities with a view to offer those securities for sale to the public, any document by
which an offer for sale to the public is made will be deemed as a prospectus issued by the Company
It shall be an evidence that allotment of shares was made with a view to offer the securities for sale to public if it is shown that:
a. Offer for sale to public was made within 6 months after allotment of shares or
b. On the date of offer for sale to public, the whole consideration to be received had not been
received

13. Contd.
Signing of deemed prospectus in case of person making an offer to the public is a Company or a firm:
Company
Firm
Two directors of the Company
Atleast one half of the partners in the firm
 Matters to be stated in prospectus under Section 26 shall have effect and in addition, the following matters to be specified:
a. Net amount of consideration received for the securities in respect of which offer is made;
b. Time and place of contract where under the said securities have been allotted may be inspected;
 Persons making the offer were persons named as directors in prospectus

14. Shelf prospectus – Section 31
• A prospectus in respect of which securities are issued for subscription in one or
more issues over a certain period without the issue of a further prospectus
Meaning
Any class or classes of Companies as prescribed by SEBI may file a shelf prospectus with the Registrar at the stage of the
first offer of securities
Such prospectus shall be valid for a period of 1 year which means that no issue of a further prospectus is required for
subsequent offer of securities included in the prospectus for a period of 1 year
Any change between current and first issue is given in the form of information memorandum
Such information memorandum shall be prepared and filed with the Registrar in Form PAS-2 within 1 month prior to the
issue of second or subsequent offer of securities

15. Contd.
Where application for allotment of securities is being received by the Company or any other person along with advance
payment of subscription amount prior to making such change, then such applicant shall be informed about such change
After informing the applicant about such change, if he/she expresses desire to withdraw the application made, then the
Company or any other person shall refund all the monies received as subscription within 15 days thereof
Where an information memorandum is filed, such memorandum together with the shelf prospectus shall be deemed to
be a prospectus

16. Red herring prospectus – Section 32
• A prospectus which does not include complete particulars of the quantum or
price of the securities included therein
Meaning
A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus
Red herring prospectus shall be filed with the Registrar at least 3 days prior to the opening of the subscription list and the offer
Any variation between the red herring prospectus and a prospectus shall be highlighted as variations in the prospectus
Once the offer is closed details of information that are not included in such prospectus is to be filed with the Registrar and SEBI

17. Abridged prospectus – Section 33
• A memorandum containing such salient features of a prospectus as may be
specified by SEBI by making regulations in this behalf
Meaning
Every form of application for the purchase of any of the securities of a company shall be accompanied by
an abridged prospectus
A copy of the prospectus shall be furnished to any person, on a request being made by such person, before the
closing of the subscription list and the offer
If a company makes any default in complying with the provisions of this section, it shall be liable to a penalty of Rs.
50,000 for each default

18. Contd.
In the following cases, abridged prospectus is not necessary to be issued:
1. Application issued in connection with bona fide invitation to a person to enter into an underwriting
agreement with respect to such securities
2. Application issued in relation to securities which were not offered to the public

19. Offer of sale of shares by certain members of the
Company – Section 28
In consultation with the Board, certain members of the Company can propose to offer whole or part of their holding of shares to the public
Any document by which the offer of sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the
company
Liability in respect of mis-statements in and omission from prospectus or otherwise relating to prospectus shall apply to such document
The members whose shares are proposed to be offered to the public, shall collectively authorise the company, whose shares are offered
for sale to the public, to take all actions in respect of offer of sale for and on their behalf
Such members shall reimburse the company all expenses incurred by it with respect to offer of sale for and on their behalf by the
Company
The deemed prospectus shall disclose the name of the person(s) or entity bearing the cost of making the offer of sale along with reasons

20. Contd.
Provisions of Part I of Chapter III* mentioned below shall not be applicable to offer of sale referred to in section 28:
*Part I of Chapter III shall mean Prospectus and Allotment of Securities and the rules framed thereunder
Minimum subscription
Statement to be made by the BOD in respect of
the utilization of money
Minimum application value
Any other provision which cannot be gathered
by the offeror, with detailed justifications for
not being able to comply with such provisions

21. Matters to be stated in prospectus – Section 26
Every prospectus shall be dated and signed and shall state such information and set out such reports on financial information
as may be specified by SEBI in consultation with CG
Until SEBI specifies such information to be disclosed in prospectus and reports to be set out, regulations made by SEBI under
SEBI Act relating to such matter shall apply
Prospectus shall make a declaration about the compliance of the provisions of the Act and a statement indicating that nothing
contained in the prospectus is contrary to the provisions of SEBI Act, SCRA and the rules and regulations made thereunder
Prospectus is not required to be issued in the following cases:
When securities are offered to existing holders of shares or debentures
When issue relates to shares or debentures uniform in all respects with shares or debentures
previously issued and dealt in or quoted on RSE

22. Contd.
The date indicated in the prospectus shall be deemed to be the date of its publication
Prospectus shall be signed by every person who is named therein as a director or proposed director of the company or by his
duly authorised attorney
Every prospectus shall, on or before the date of its publication, be filed with the Registrar
Prospectus shall be issued by or on behalf of a company or in relation to an intended company only after the same has been
filed with the Registrar
Prospectus shall state on the face of it that a copy has been filed with the Registrar and specify the documents attached to the
copy so filed or refer to statements in the prospectus which specify such documents
Prospectus shall be valid to be issued within a period of 90 days from the date on which the copy has been filed with the
Registrar

23. Contd.
A prospectus issued shall not include a statement purporting to be made by an expert unless the expert is,
1. A person who is not, and has not been, engaged or interested in the formation or promotion or
management, of the company
2. Has given his written consent to the issue of the prospectus
3. Has not withdrawn such consent before filing the copy of the prospectus with the Registrar and a
statement to that effect shall be included in the prospectus
Contravening the provisions of this section:
Company Every person who is knowingly a party to the issue of
prospectus
Fine - Rs. 50,000 to 3,00,000 Fine - Rs. 50,000 to 3,00,000 (OR)
Imprisonment – Maximum 3 years (OR) Both

24. Variation in terms of prospectus – Section 27
A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus
was issued, unless approval by way of special resolution is obtained*
Where a company has any unutilized amount out of the money raised through issue of prospectus, it shall not vary the terms
of contracts referred in it or objects for which the it was issued unless special resolution through postal ballot is passed*
Notice of resolution to be passed, shall also be published in the newspapers (one in English and one in vernacular language) in
the city where the registered office of the company is situated indicating clearly the justification for such variation
Such notice shall be in Form PAS-1 and such advertisement shall be published simultaneously with dispatch of Postal Ballot
Notices to Shareholders. The notice shall also be placed on the web-site of the company, if any
Such company shall not use any amount raised by it through prospectus for buying, trading or otherwise dealing in equity
shares of any other listed company
Those shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the
prospectus, shall be given an exit offer by promoters or controlling shareholders in such manner as specified by SEBI
*Form MGT-14 to be filed within 30 days of passing special resolution

25. Contd.
Notice of the resolution shall contain the following particulars:
Original purpose or object of
the Issue
Total money raised
Money utilised for the
objects of the company
stated in the prospectus
Extent of achievement of
proposed objects(that is fifty
percent, sixty percent, etc.)
Unutilised amount out of
the money so raised through
prospectus
Particulars of the proposed
variation in the terms of
contracts referred to in the
prospectus or objects for
which prospectus was issued
Reason and justification for
seeking variation
Proposed time limit within
which the proposed varied
objects would be achieved
Risk factors pertaining to the
new objects
Other relevant information
which is necessary for the
members to take an informed
decision on the proposed
resolution

26. Public offer of securities in demat form – Section 29
Following Companies shall issue securities only in demat form by complying with the provisions of Depositories Act, 1996:
a. Every Company making public offer
b. Such other class or classes of Companies as may be prescribed*
The promoters of every public company making a public offer of any convertible securities may hold
such securities only in demat form
Promoters’ entire holding of convertible securities held in physical form up to the date of IPO shall be
converted into demat form before such offer is made and thereafter such promoter shareholding
shall be held in demat form only
*No Company has been specifically prescribed as on date

27. Issue of securities in demat form by UPC – Rule 9A
Every Unlisted Public Company (UPC) shall
Issue the securities only in demat form and
Facilitate demat of all its existing securities
in accordance with
provisions of the
Depositories Act,
1996 and regulations
made there under
Every UPC making any offer for issue of securities or buyback of securities shall ensure that before making such offer, entire
holding of securities of its promoters, directors, KMP has been dematerialised as per Depositories Act 1996 and its regulations
On or after 2nd October, 2018, every holder of securities of an UPC who,
Intends to transfer such
securities
Subscribes to any
securities of UPC
shall get such securities dematerialised before the transfer
shall ensure that all his existing securities are held in demat form before such
subscription

28. Contd.
Every UPC shall facilitate demat of all its existing securities by making necessary application to a depository as defined in Depositories
Act, 1996 and shall secure ISIN for each type of security and shall inform all its existing security holders about such facility
Every UPC shall ensure that the following formalities are complied with:
It makes timely payment of fees to the depository and RTA in accordance with the agreement executed between the parties
It maintains security deposit at all times, of atleast 2 years, fees with the depository and RTA in such form as may be agreed
between the parties
It complies with the regulations or directions or guidelines or circulars, if any, issued by SEBI or Depository from time to
time with respect to demat of shares of UPC and matters incidental or related thereto
Unless UPC complies with all the conditions mentioned above, it shall not make offer of any securities or buyback its securities

29. Contd.
Every UPC governed by Rule 9A shall submit Form PAS-6 to the Registrar within sixty days from the conclusion of each half year
duly certified by a practising CS or CA
Company shall immediately bring to the notice of depositories any change observed in its issued capital and the capital held in demat form
The grievances, if any, of security holders of UPC under this rule shall be filed before IEPF Authority
IEPF Authority shall initiate any action against a depository or participant or RTA after prior consultation with SEBI
Rule 9A shall not apply to an UPC which is:
1. a Nidhi Company;
2. a Government company or
3. a wholly owned subsidiary

30. Advertisement of prospectus – Section 30
Where an advertisement of any prospectus of a company is published, it shall specify the following:
Contents of its memorandum as regards the objects, the liability of members and the amount of share
capital of the company
The names of the signatories to the memorandum and the number of shares subscribed for by them
The capital structure of the Company

31. Allotment of shares – Section 39
Shares offered to the public for subscription shall not be allotted unless minimum subscription has been received by the
Company through banking channels
Minimum subscription amount shall be atleast 5% of the nominal amount of shares or such other % as may be specified by SEBI
If minimum subscription is not received within 30 days from the date of issue of prospectus or such other period as specified by
SEBI, the total money received shall be refunded within 15 days from the date of closure of the issue
If any such money is not so repaid within such period, the directors of the company who are officers in default shall jointly and
severally be liable to repay that money with interest at the rate of 15% p.a.
Whenever allotment of shares has been made by the Company, Form PAS-3 shall be filed within 30 days from the date of
allotment
Contravening the provisions of this section:
Company and officer in default Fine – Rs. 1000 for each day of continuing default or Rs. 1 lakh
Whichever is less

32. Securities to be dealt with in Stock Exchanges –
Section 40
Every company making public offer shall, before making such offer, make an application to one or more RSE(s) and obtain
permission for the securities to be dealt with in such stock exchange(s)
Where a prospectus states that an application as stated above has been made, such prospectus shall also state the name or
names of the stock exchange in which the securities shall be dealt with
All monies received on application from the public for subscription to the securities shall be kept in a separate bank account in
a scheduled bank and shall not be utilised for any purpose other than adjustment against allotment or for repayment
Any condition purporting to require or bind any applicant for securities to waive compliance with any of the requirements of
this section shall be void
A company may pay commission to any person in connection with the subscription to its securities subject to such conditions as
may be prescribed (discussed in subsequent slide)
Contravening the provisions of this section:
Company Every officer in default
Fine - Rs. 5,00,000 to 50,00,000 Fine - Rs. 50,000 to 3,00,000 (OR)
Imprisonment – Maximum 1 year (OR) Both

33. Payment of commission
Commission shall be paid to any person in connection with subscription or procurement of subscription to its securities subject to following:
Such payment has been authorised by the Articles of Association of the Company
Commission may be paid out of proceeds of the issue or the profit of the company or both
Rate of commission shall not exceed 5% of the issue price of shares or rate authorised by the Articles, whichever is lower
Copy of contract for payment of commission shall be filed with the Registrar
Commission shall not be paid to any underwriter on securities which are not offered to the public for subscription
Prospectus shall disclose name of underwriters, rate and amount of commission payable and the number of securities to
be underwritten

34. Judicial Precedents
A P L Industries Ltd. vs. Securities Exchange Board of India (SEBI) - [2016] 76 taxmann.com 133 (Delhi)
Petitioner-Company had not received minimum subscription amount as stated in the prospectus issued for public issue of shares
SEBI advised petitioner-company to refund application monies so received against public issue to share applicants. High Court too ordered
the same as advised by SEBI
Petitioner-company wrote letters to respondent banks requesting them to refund all monies to applicants along with accrued interest. But
banks clarified that they have not earned any interest on application money and stated that company and its Director would be jointly and
severally liable to repay money to share applicants with interest
Petitioner-company wrote letter to SEBI stating that legal action has been initiated against the respondent banks for denying such payment
Delhi HC held that initiating legal proceedings against respondent banks could not be a ground to explain non-compliance of order of high
court directing refund of money to share applicants. Hence, it was duty of petitioner-company to have made available adequate funds to
respondent banks for them to refund the same to share applicants

35. Thank You
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