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CS Professional · Strategic Management and Corporate Finance · Raising of Funds from Equity and Procedural Aspects - Public Funding

Under section 28 of the Companies Act, 2013, certain members of a company wish to offer part of their holding to the public in consultation with the Board. Which statement is correct?

The selling members must collectively authorise the company to take all actions for the offer on their behalf and must reimburse the company's expenses. The offer document is deemed a prospectus issued by the company, with full prospectus liability applying.

  1. AEach selling member must separately issue his own prospectus and bear its liability alone
  2. BThe members must collectively authorise the company to take all actions in respect of the offer on their behalf and reimburse the company its expensesCorrect
  3. CThe company bears all expenses of the offer for sale without recovery from the members
  4. DThe offer document is not treated as a prospectus because no new shares are issued

Explanation

Section 28(3) requires the members whose shares are offered to collectively authorise the company to act for them and to reimburse the expenses incurred. Under section 28(2) the offer document is deemed a prospectus issued by the company, so the other options contradict the section.

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