Section 23 of the Companies Act, 2013: Public Offer and Private Placement of Securities

Section 23 of the Companies Act, 2013 sets out the principal methods by which public and private companies may issue securities. It covers public offers, private placements, rights issues and bonus issues, and also contains provisions enabling specified public companies to issue specified securities for listing in permitted foreign jurisdictions.

Current position: Sub-sections (3) and (4), inserted by the Companies (Amendment) Act, 2020, came into force on 30 October 2023. They provide the statutory basis for eligible public companies to access permitted overseas listing venues, subject to the applicable rules and scheme.

What does Section 23 provide?

Company	Permitted methods under Section 23
Public company	Public offer through prospectus; private placement; rights issue; bonus issue; and, for prescribed classes, issue of prescribed securities for listing on permitted stock exchanges in permissible foreign jurisdictions.
Private company	Rights issue; bonus issue; or private placement.

Section 23(1): How a public company may issue securities

A public company may issue securities:

(a) Public offer: to the public through a prospectus, subject to Part I of Chapter III of the Companies Act, 2013 and, where applicable, the securities laws and regulations administered by SEBI.

(b) Private placement: by complying with Part II of Chapter III, particularly Section 42 relating to private placement and the applicable Companies (Prospectus and Allotment of Securities) Rules, 2014.

(c) Rights or bonus issue: in accordance with the Companies Act, 2013. A listed company, or a company intending to list its securities, must also comply with the SEBI Act, 1992 and applicable rules and regulations.

Section 23(2): How a private company may issue securities

A private company does not make a public offer under Section 23. It may issue securities by way of a rights issue or bonus issue in accordance with the Act, or through private placement by complying with Part II of Chapter III.

Section 23(3): Listing on permitted foreign stock exchanges

Section 23(3) permits such class of public companies as may be prescribed to issue such class of securities for listing on permitted stock exchanges in permissible foreign jurisdictions or other prescribed jurisdictions. This provision was inserted by the Companies (Amendment) Act, 2020 and brought into force from 30 October 2023.

The Companies (Listing of Equity Shares in Permissible Jurisdictions) Rules, 2024 provide the company-law framework for eligible unlisted public companies to issue equity shares, including an offer for sale by existing shareholders, for listing on a permitted stock exchange in a permissible jurisdiction. The rules prescribe eligibility conditions and require filing of the prospectus in e-Form LEAP-1 within the prescribed period.

Section 23(4): Power of Central Government to grant exemptions

Under Section 23(4), the Central Government may, by notification, exempt a class or classes of public companies covered by Section 23(3) from specified provisions of Chapter III, Chapter IV, Sections 89, 90 or 127. Such notification is required to be laid before both Houses of Parliament.

Meaning of "public offer" under Section 23

The Explanation to Section 23 states that, for Chapter III, a public offer includes an initial public offer (IPO), a further public offer (FPO) of securities to the public by a company, and an offer for sale of securities to the public by an existing shareholder through issue of a prospectus.

Public offer and SEBI compliance

For listed companies and companies proposing to list their securities, Section 23 operates together with the SEBI Act and applicable SEBI regulations. Public issues of specified securities are principally regulated under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended from time to time.

Private placement: related legal provisions

Section 23 identifies private placement as an issue route; the detailed procedure is primarily contained in Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014. These provisions govern matters such as approval, identified persons, the private placement offer-cum-application letter, receipt of subscription money, allotment and filing of the return of allotment.

Practical distinction between the issue routes

Route	Basic character	Key legal framework
Public offer	Offer to the public through a prospectus, including IPO, FPO or offer for sale.	Companies Act, 2013, Chapter III Part I; applicable SEBI regulations.
Private placement	Offer or invitation to identified persons in accordance with the statutory private-placement procedure.	Section 42 and Rule 14 of the Companies (Prospectus and Allotment of Securities) Rules, 2014.
Rights issue	Offer of further shares to existing equity shareholders in proportion to their holdings, subject to the Act.	Section 62 and other applicable provisions.
Bonus issue	Issue of fully paid-up bonus shares to existing members subject to statutory conditions.	Section 63 and applicable rules.

Official legal resources

For compliance or professional use, the current statutory text, notifications and securities regulations should be checked from the official sources because rules and regulations may be amended after publication of this article.

Updated: 16 September 2026. This article is for general legal information and does not replace professional advice for a specific securities issue or transaction.