Offer For Sale Of Shares In A Company: Section 28, Companies Act 2013
Updated: Oct 3, 2022
What is Section 28 of the Companies Act 2013?
*28. (1) Where certain members of a company propose, in consultation with the Board of Directors to offer, in accordance with the provisions of any law for the time being in force, whole or part of their holding of shares to the public, they may do so in accordance with such procedure as may be prescribed.
(2) 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 and all laws and rules made thereunder as to the contents of the prospectus and as to liability in respect of mis-statements in and omission from prospectus or otherwise relating to prospectus shall apply as if this is a prospectus issued by the company.
(3) The members, whether individuals or bodies corporate or both, whose shares are proposed to be offered to the public, shall collectively authorize 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 and they shall reimburse the company all expenses incurred by it on this matter.
What is an Offer for Sale of Shares?
An "Offer for Sale of Shares” means an offer of securities by existing members to the general public for subscription through an offer document. It extends to all securities. Even the existing members of a listed company can offer securities to the general public through an offer document.
An offer for sale occurs where a company allots shares or debentures to allottees. Normally an issuing house which will publish an invitation to the public offering these shares or debentures for sale on application by a member of public. The issuing house renounces the allotment as far as relating to securities to which the application in favor of purchasers who becomes a direct allottee of shares or debentures. This procedure has the advantage of saving stamp duty which would be payable on a transfer of shares or debentures from the issuing house to the purchaser which is not payable on direct allotment.
In the offer for sale of shares, certain members of a company propose, in consultation with the Board of Directors to offer, whole or part of their holding of shares to the public in accordance with such procedure as may be prescribed.
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. All the laws and rules relating to prospectus and liability relating to mis-statements and omission from prospectus or otherwise shall apply as if this is a prospectus issued by the company.
The members (whether individual or body corporate) whose shares are proposed to be offered to public, shall collectively authorize the company to take all actions in respect of offer of sale and they shall reimburse the company all expenses incurred by it on this matter.