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CS Executive · Capital Market and Securities Laws · Issue and Listing of Non-Convertible Securities

Sunrise Foods Ltd, a public company, plans to raise funds by inviting the general public to subscribe to its securities through a prospectus. Under the Companies Act, 2013, which description fits this mode of issue?

Issuing securities to the general public through a prospectus is called a public offer under section 23 of the Companies Act, 2013. Private placement, rights issue and bonus issue are distinct routes and do not involve an open invitation to the public by prospectus.

  1. APrivate placement under Part II of the Chapter
  2. BPublic offer by prospectusCorrect
  3. CRights issue to existing shareholders
  4. DBonus issue out of free reserves

Explanation

Section 23 states that a public company may issue securities to the public through a prospectus, termed a public offer. Private placement, rights and bonus issues are separate routes listed in other clauses of the same section. Inviting the general public by prospectus is therefore a public offer.

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