## Public Offer and Private Placement [Section 23]

A company can issue securities only through the routes permitted to its class.

### Modes of issue available

Public company may issue securities through:

Public issue through a prospectus, which includes:
Initial Public Offer (IPO) — first-time offer of shares to public, leading to listing on a stock exchange.
Further Public Offer (FPO) — additional issue by an already-listed company to raise more funds post-IPO.
Offer for Sale (OFS) — existing shareholders sell their stake; no new shares are issued, and proceeds go to the sellers, not the company.
Private Placement
Rights issue or Bonus issue

Private company may issue securities only through:

Private Placement
Rights issue or Bonus issue

> A private company is prohibited from making a public offer — it cannot issue a prospectus inviting the public to subscribe.

### What 'securities' means here

Securities include:

Equity shares
Preference shares
Debentures
Derivatives
Actionable claims
Mutual fund units

Unit-linked insurance policies (ULIPs) are not securities.

### Quick comparison: IPO vs FPO vs OFS

Mode	Who issues / sells	Proceeds go to
IPO	Unlisted company issuing new shares	Company
FPO	Listed company issuing fresh shares	Company
OFS	Existing shareholders selling	Selling shareholders

Worked example

### Example 1

Q. ABC Ltd., a private company, wants to raise ₹50 crore by issuing equity to the general public through a prospectus. Is this permissible?

A. No. Under Section 23, a private company may issue securities only by way of private placement, rights issue or bonus issue. A public offer through a prospectus is impermissible. ABC Ltd. must first convert into a public company (or use private placement to selected investors).

⚠️ Common exam mistakes

Treating ULIPs as 'securities' under Section 23 — they are excluded.
Saying the company receives proceeds in an OFS — proceeds belong to the selling shareholders, not the company.
Forgetting that a private company cannot make a public offer/issue a prospectus.

Bare-Act text Section 23 · Companies Act, 2013 · click to expand

A public company may issue securities — (a) to public through prospectus (i.e. public offer); or (b) through private placement; or (c) through a rights issue or a bonus issue. A private company may issue securities — (a) by way of rights issue or bonus issue; or (b) through private placement.

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