The Companies Act, 2013 provide manner in which securities can issued by public company and private company. Chapter III of the Companies Act, 2013 deals with “Prospectus and allotment of securities”, the chapter is divided into two parts, Part I deals with Public Offer and Part II deals with Private Placement. “Prospectus and allotment of securities” covers section 23-42 of this Act.
Issue of securities
As per Section 23(1) of the Companies Act, 2013, A Public Company may issue securities:
(a) to public through prospectus (“public offer”) or
(b) through private placement or
(c) through a rights issue or a bonus issue.
As per Section 23(2) of the Companies Act, 2013, A private company may issue securities:
(a) by way of rights issue or bonus issue or
(b) through private placement.
Defination of public offer - Explanation to Section 23 states that “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.
Defination of private placement - Explanation I to Section 42 defines private placement as any offer or invitation to subscribe or issue of securities to a select group of persons by a company (other than by way of public offer) through private placement offer-cum-application, which satisfies the conditions specified in this section.