## Section 25 — Document Containing Offer for Sale of Securities Deemed to be Prospectus

### Concept

Where a company allots or agrees to allot any securities of the company with a view that those securities shall be offered for sale to the public, any document by which the offer for sale (OFS) to the public is made shall be deemed to be a prospectus issued by the company.

### Effect

1. All provisions of the Act relating to contents of prospectus (Section 26) shall apply.

2. All provisions relating to liability for misstatements (Sections 34, 35, 36) shall apply.

3. Persons making the OFS — i.e., the offerors — are deemed to be directors of the company for purposes of liability.

### Presumption — when does OFS attract Section 25

Unless the contrary is proved, it shall be evidence that an allotment was made with a view to the securities being offered for sale to the public if it is shown that:

An OFS to the public was made within 6 months after the allotment or agreement to allot, OR
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.

### Additional matters to be stated in deemed prospectus (over and above Section 26)

The document shall also state:

The net amount of consideration received or to be received by the company.
The time and place at which the contract for allotment may be inspected.

Worked example

### Example 1

Example: ABC Ltd. allots 10 lakh shares to a financial institution. Within 4 months, the FI offers these shares to the public via an OFS document. This document is deemed to be a prospectus under Section 25. The FI is treated as a director for liability and Section 26 disclosures apply.

### Example 2

Example: A company allots shares to an intermediary but receives only 60% of the consideration. The intermediary makes an OFS — even after 6 months, the OFS document is deemed a prospectus because full consideration was not received.

⚠️ Common exam mistakes

Forgetting that the 6-month and consideration tests are alternatives (either triggers the deeming).
Missing the additional disclosure of net consideration and inspection details.
Not realising that OFS offerors are treated as directors for liability purposes.

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

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; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis-statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply with the modifications specified in sub-sections (3) and (4) and shall have effect accordingly.

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Section 25 - Document Containing Offer for Sale Deemed Prospectus

Worked example

⚠️ Common exam mistakes