# Section 25 — Deemed Prospectus / Prospectus by Implication

## Concept: Offer for Sale

When a company allots securities not to the public directly but to an intermediary (issue house), which then resells those securities to the public — the document used by the intermediary to sell to the public is treated as if it were a prospectus issued by the company itself.

This prevents companies from evading prospectus liability by routing issues through middlemen.

## Provisions of Section 25

### (i) Document is Deemed Prospectus

Where a company allots or agrees to allot securities to a person with a view to those securities being offered for sale to the public, the document by which such offer is made shall be deemed to be a prospectus issued by the company.

### (ii) Contents & Liability

All enactments and rules of law regarding:

Contents of prospectus, AND
Liability for misstatements/omissions in prospectus,

…apply to the deemed prospectus.

### (iii) Two Tests for "Offered for Sale to Public"

It shall be evident that the allotment was made with a view to offering to the public if EITHER:

(a) The offer for sale to the public was made within 6 months after the allotment or agreement to allot, OR
(b) At the date of the offer, the whole consideration had not been received by the company in respect of the securities.

### (iv) Section 26 Modifications

When Section 26 (matters to be stated in prospectus) is applied to a deemed prospectus, it operates as if it required the prospectus to ALSO state:

(a) The net amount of consideration received or to be received by the company for the securities, AND
(b) The time and place at which the contract under which the securities were allotted may be inspected.
(II) Persons making the offer are deemed to be named in the prospectus as directors.

### (v) Signing Requirement

Where the person making the offer is:

A company: Document signed by 2 directors of that company, OR
A firm: Signed by not less than one-half of the partners of the firm.

## Memory Aid

"6-Month or No-Consideration Test" triggers Section 25.

Think: "Company → Intermediary → Public within 6 months = Deemed Prospectus"

Worked example

### Example 1

Example 1 — 6-Month Test: XYZ Ltd allots 10 lakh shares to ABC Issue House Ltd on 1st January 2026. On 1st May 2026 (4 months later), ABC offers these shares to the public through a circular. Answer: Since the offer was made within 6 months of allotment, the offer is deemed to be made with a view to selling to the public. The circular by ABC is a deemed prospectus of XYZ Ltd. XYZ remains liable for any misstatements/omissions.

### Example 2

Example 2 — Consideration Test: PQR Ltd allots shares to LMN Bank against a partial consideration of ₹40 crores out of total ₹100 crores (balance to be paid later). LMN Bank issues a document offering these shares to the public 9 months later. Answer: Although more than 6 months have passed, the whole consideration was not received by PQR at the date of the offer. So the second test under Section 25(iii)(b) is satisfied — the document is a deemed prospectus of PQR Ltd.

### Example 3

Example 3 — Signing Requirement: A partnership firm of 8 partners is offering shares (previously allotted to it) to the public. How many partners must sign the deemed prospectus? Answer: Not less than one-half of the partners, i.e., at least 4 partners must sign.

⚠️ Common exam mistakes

Forgetting BOTH tests under Section 25(iii) — the 6-month test AND the unpaid consideration test (either triggers deemed prospectus status).
Believing only the intermediary is liable for misstatements — the company itself is liable because document is deemed issued by the company.
Confusing signing rules — 2 directors for a company; one-half of partners for a firm.
Not realizing Section 26's additional disclosures (net consideration, place for contract inspection) apply to deemed prospectus.
Thinking 'public' means only the public at large — see Section 25's interpretation: any section of the public counts.

Bare-Act text Section 25 of the Companies Act, 2013 · The Companies Act, 2013 · click to expand

Section 25 — Document containing offer of securities for sale to be deemed prospectus: (1) Where a company allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company. (2) It shall be evident that an allotment was made with a view to the securities being offered for sale to the public if it is shown (a) that an offer of the securities for sale to the public was made within 6 months after the allotment or agreement to allot; or (b) that at the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it. (3) Section 26 shall have effect as if it required a prospectus to state in addition the net amount of consideration received and the place where the contract may be inspected. (4) Where the offeror is a company, the document shall be signed by two directors; where a firm, by not less than one-half of the partners.

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Section 25 - Deemed Prospectus (Offer for Sale)

Worked example

⚠️ Common exam mistakes