Public Offer Listing explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Under the old Act you had to ask. Under this one you have to have been told yes.
The public offer listing change
As per Section 40 of the CA, 2013, it is mandatory for companies to make an application to one or more recognised stock exchange or exchanges and obtain permission for the securities to be dealt with in such stock exchange or exchange before making a public offer.
As per Section 40(1) of the CA, 2013, it is specifically provided that every company which desires to make public offer should make application to one or more stock exchanges and take prior permission for dealing in securities.
The requirement under section 73(1) of the CA, 1956 was only to make an application. A company could file with the exchange, open its offer, collect subscription money — and then learn the application had been refused.
Consider what an investor held at that point. Shares in a company they had bought precisely because they expected to be able to sell them on an exchange, in a market that did not exist. The 1956 Act addressed the aftermath with provisions on refund of application money and voidness of allotment, but by then the money had been collected, the offer had closed, and recovery depended on the company still being able to pay it back.
The real problem was one of sequence. The risk that listing might be refused was borne by investors who had already parted with their money and had no way to assess it — the exchange's decision turns on factors the prospectus does not disclose.
Section 40(1) moves the decision to the front: take prior permission for dealing in securities before the offer is made. The exchange's assessment happens while the company is the only party exposed to the outcome. If permission is refused, no public money has been raised, and there is nothing to unwind.
The word prior carries the whole of the change. A company that has applied has done half of what the section requires; the offer cannot open until the answer arrives.
Note the boundary. A private company cannot make a public offer at all — section 2(68) prohibits it from inviting the public to subscribe to any securities it issues. Its route to outside capital is private placement, and for debentures the same restriction applies: a private company can issue debentures only through private placement.
Then and now
| Section 73(1), CA 1956 | Section 40(1), CA 2013 | |
|---|---|---|
| What is required | Make an application | Obtain permission |
| When | In connection with the offer | Before making the offer |
| Who bears the refusal risk | Investors who have already subscribed | The company, before any money is raised |
| Exchanges | One or more recognised stock exchanges | |
Public offer listing: the sequence
- Board and shareholder approvals for the issue.
- Application to one or more recognised stock exchanges.
- Permission obtained for the securities to be dealt with.
- Prospectus filed and the offer opened.
- Allotment, and the consequences under section 40 if permission had not been obtained.
Common mistakes
- Opening a public offer on the strength of a pending public offer listing application.
- Applying to an exchange that is not a recognised stock exchange.
- Assuming the 1956 position that an application alone sufficed.
- Treating a private company placement to a large number of persons as an alternative to a public offer.