Section 21, Authentication of documents, proceedings and contracts

As per the provisions of this act, it is the duty of KMP (Key Managerial Personnel) or an officer of the company duly authorized by the board should sign:

  • a document or proceeding requiring authentication by a company; or
  • contracts made by or on behalf of a company.

Section 22, Execution of bills of exchange, etc

If a bill of exchange, hundi or promissory note has been made, accepted, drawn, or endorsed in the name of, or on behalf of or on account of, the company by any person acting under its authority, express or implied then it shall be deemed to have been made, accepted, drawn or endorsed on behalf of a company.

Person under Authority:

A company may, by writing under its common seal authorise any person, either generally or in respect of any specified matters, as its attorney to execute other deeds on its behalf in any place either in or outside India.

In case a company does not have a common seal, the authorization shall be made by two directors or by a director and the Company Secretary, wherever the company has appointed a Company Secretary.

Section 23, Public Offer & Private Placement

Before discussing the provisions of this section, it is important to know about the term Prospectus:

Meaning of Prospectus:

It means any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate which includes red herring prospectus and shelf prospectus.

Now let us see Public Offer & Private Placement:

A public company may issue securities—

  • To public through prospectus (herein referred to as “public offer”) by complying with the provisions of this Part; or
  • Through private placement*

Through  rights issue or a bonus issue in accordance with the provisions of this Act and in case of a listed company or a company which intends to get its securities listed also with the provisions of the Securities and Exchange Board of India Act, 1992 and the rules and regulations made thereunder.

A private company may issue securities—

  • By way of rights issue or bonus issue in accordance with the provisions of this Act; or
  • Through private placement*

*Meaning of Private Placement: A private placement is the sale of securities to a relatively small number of select investors as a way of raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. A private placement is different from a public issue, in which securities are made available for sale on the open market to any type of investor.

“public offer” includes initial public offer# or further public offer# of securities to the public by a company, or an offer for sale of securities to the public by an existing shareholder, through issue of a prospectus.

Initial Public Offer: A primary market is one that issues new securities on an exchange. The primary markets are where investors can get first crack at a new security issuance. The issuing company offers its equity to investors or groups and receives cash proceeds from the sale, which is then used to fund operations or expand the business. It is the largest source of funds with long or indefinite maturity for the company.

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