## Offer of Sale of Shares by Certain Members [Section 28]

When existing members of a company want to offer their shares to the public in consultation with the Board, the company itself acts as the conduit.

### Key obligations on selling members

They must authorise the company to take all required actions on their behalf for the offer.
They must reimburse the company for all expenses incurred in connection with the offer.

> This is the legal mechanism that underpins an Offer for Sale (OFS) — the company makes the offer, but the money flows to the selling shareholders, not the company.

Worked example

### Example 1

Q. Three promoters of L Ltd. want to dilute 15% of their shareholding via a public offer. They want L Ltd. to handle prospectus filing, banker appointment and listing formalities. What does Section 28 require?

A. The promoters must (i) authorise L Ltd. in writing to take all actions on their behalf and (ii) reimburse L Ltd. for all expenses incurred in making the offer. The sale proceeds will flow to the selling promoters, not to L Ltd.

⚠️ Common exam mistakes

Assuming the company keeps the proceeds — in an OFS under Section 28, the money belongs to the selling members.
Forgetting the reimbursement obligation: the company is acting as agent and must be made whole.

Bare-Act text Section 28 · Companies Act, 2013 · click to expand

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.

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →