Companies Act, 2013 · Chapter III: Prospectus And Allotment Of Securities · In force
This section is for regulating how companies' securities are traded on stock exchanges when they make a public offer.
What the section says
In plain terms
(1)Every company making public offer shall, before making such offer, 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 exchanges.
A company making a public offer must apply to a recognised stock exchange to get permission for its securities to be traded on that exchange before making the offer.
(2)Where a prospectus states that an application under sub-section (1) has been made, such prospectus shall also state the name or names of the stock exchange in which the securities shall be dealt with.
If a prospectus says the company has applied to a stock exchange, it must also say which stock exchange the securities will be traded on.
(3)All monies received on application from the public for subscription to the securities shall be kept in a separate bank account in a scheduled bank and shall not be utilised for any purpose other than—
Money from public applications for securities must be kept in a separate bank account and only used for allotting securities or repaying applicants.
(3)(a)for adjustment against allotment of securities where the securities have been permitted to be dealt with in the stock exchange or stock exchanges specified in the prospectus; or
(3)(b)for the repayment of monies within the time specified by the Securities and Exchange Board, received from applicants in pursuance of the prospectus, where the company is for any other reason unable to allot securities.
(4)Any condition purporting to require or bind any applicant for securities to waive compliance with any of the requirements of this section shall be void.
Any condition that tries to get applicants to ignore the rules in this section is not valid.
(5)If a default is made in complying with the provisions of this section, the company shall be punishable with a fine which shall not be less than five lakh rupees but which may extend to fifty lakh rupees and every officer of the company who is in default shall be punishable 1*** or with fine which shall not be less than fifty thousand rupees but which may extend to 2[three lakh rupees].
If a company does not follow the rules in this section, it can be fined between 5 lakh rupees and 50 lakh rupees, and its officers can be fined between 50,000 rupees and 3 lakh rupees.
(6)A company may pay commission to any person in connection with the subscription to its securities subject to such conditions as may be prescribed.
A company can pay commission to someone for helping to sell its securities, as long as it follows the prescribed conditions.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.