Company law offer for sale, Assignments of Company Secretarial Practice

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Prospectus -Offer for sal

e(OFS)

Presented by:- Abhinav Shukla Ballb(Hons.) 201710301140021

Introduction:-

• (^) Financial markets have an important relationship with economic development. A company decides to issue securities for different reasons; the main reason being raising capital to meet its financi al requirements may be for starting a venture, repaying debts, e xpansion and diversification.
• (^) When an investor buys securities he is enabling the company to carry on its business using those funds.

Prospectus

• In general parlance prospectus refers to an information booklet or offer document on the basis of which an investor invests in the securities of an issuer company.
• It has been defined under section 2(70).
• Any notice, circular, advertisement or any other document inviting offers from public for the subscription or purchase of securities shall be included in the definition of Prospectus.
• A prospectus includes some of the following information:

1. A brief summary of the company’s background and financial information 2.The name of the company issuing the stock 3.The number of shares 4.Type of securities being offered 5.Whether an offering is public or private 6.Names of the company’s principals 7.Names of the banks or financial companies performing the underwriting

What is OFS(offer for sal e)? A company launches an initial public offering (IPO) for additional funding. The company sells shares to outside investors so that it can gain access to funds for various purposes. This includes growth and expansion of the company. However, the company’s financial problems do not end with an IPO. Sometimes, a company may need additional capital to meet its goals. That’s the time such companies can opt to go for an Offer for Sale (OFS).

Offer of sale of shares by cer tain members of a company Section 28 of the Act permits certain members of a company, in consultation with Board of directors, to offer the whole or a part of their holdings of shares to the public. The document by which the offer of sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company.

How to bid in an OFS? In an OFS, a buyer has to provide a bid in order to acquire the shares. The company sets a ‘floor price.’ Buyers cannot bid at a price below the floor price. Once the bids are placed, shares are allocated to the different buyers. There is no minimum limit to participate in an OFS. A buyer can bid for even a single share in the OFS process.

Rules & regulations in a n OFS:- a) This facility is available only to the top 200 companies in the share market. The ranking is based on market capitalisation. b) Non-promoter shareholders with more than 10% of share capital are also eligible to offer shares through an OFS c) The company has to inform the stock exchanges at least two days before the OFS d) SEBI has mandated that at least 25% of shares in an OFS must be reserved for mutual fund and insurance companies e) In addition, a 10% reservation is made for retail buyers

To sum up:- An OFS is a simple and convenient way for promoters to divest their shareholdings in a publicly listed company.