{"id":231697,"date":"2025-11-03T18:09:49","date_gmt":"2025-11-03T12:39:49","guid":{"rendered":"https:\/\/www.oliveboard.in\/blog\/?p=231697"},"modified":"2025-11-03T18:09:58","modified_gmt":"2025-11-03T12:39:58","slug":"companies-act-2013-chapter-3","status":"publish","type":"post","link":"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/","title":{"rendered":"Companies Act 2013 Chapter 3 Notes, Download Free PDF"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_77 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of content<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/#Topics_Covered_Under_Companies_Act_2013_Chapter_3\" >Topics Covered Under Companies Act 2013 Chapter 3<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/#Understanding_Public_Offer_and_Private_Placement\" >Understanding Public Offer and Private Placement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/#Part_I_%E2%80%93_Public_Offer_Sections_23%E2%80%9341\" >Part I \u2013 Public Offer (Sections 23\u201341)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/#Part_II_%E2%80%93_Private_Placement_Section_42_%E2%80%93_Issue_of_Shares_on_Private_Placement_Basis\" >Part II \u2013 Private Placement (Section 42 \u2013 Issue of Shares on Private Placement Basis)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/#Download_Companies_Act_2013_Free_PDF\" >Download Companies Act 2013 Free PDF<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/#Questions_Based_on_Companies_Act_2013_Chapter_3\" >Questions Based on Companies Act 2013, Chapter 3<\/a><\/li><\/ul><\/nav><\/div>\n\n<p>The Companies Act, 2013 is one of India\u2019s most significant business laws. It governs how companies are created, managed, and regulated. One of the most important parts of this Act is Chapter III, which focuses on the \u201cProspectus and Allotment of Securities.\u201d<\/p>\n\n\n\n<p>This chapter explains the legal framework for how companies raise money through public offers and private placements. It also protects investors from fraud and ensures that companies follow fair and transparent practices while issuing securities.<\/p>\n\n\n\n<p>In this blog, we have provided details about the topics covered under Chapter 3 of the Act, along with a direct link to download the Companies Act, 2013 PDF.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-topics-covered-under-companies-act-2013-chapter-3\"><span class=\"ez-toc-section\" id=\"Topics_Covered_Under_Companies_Act_2013_Chapter_3\"><\/span>Topics Covered Under Companies Act 2013 Chapter 3<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Chapter III of the <a href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013\/?ref=contac-aib\" target=\"_blank\" rel=\"noreferrer noopener\">Companies Act, 2013<\/a>, includes Sections 23 to 42 and is divided into two parts:<\/p>\n\n\n\n<figure class=\"wp-block-table\"><table class=\"has-fixed-layout\"><tbody><tr><td><strong>Notification<\/strong><\/td><td><strong>Notification<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/www.oliveboard.in\/ugc-net-notification\/?ref=contac-nai\" target=\"_blank\" rel=\"noreferrer noopener\">UGC NET Notification<\/a><\/td><td><a href=\"https:\/\/www.oliveboard.in\/sebi-grade-a-notification\/?ref=contac-nai\" target=\"_blank\" rel=\"noreferrer noopener\">SEBI Grade A Notification<\/a><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-part-i-public-offer-sections-23-to-41\">Part I \u2013 Public Offer (Sections 23 to 41)<\/h3>\n\n\n\n<ol class=\"wp-block-list\">\n<li>Section 23 \u2013 Public offer and private placement<\/li>\n\n\n\n<li>Section 24 \u2013 Power of SEBI to regulate issue and transfer of securities<\/li>\n\n\n\n<li>Section 25 \u2013 Offer of securities for sale to be deemed prospectus<\/li>\n\n\n\n<li>Section 26 \u2013 Matters to be stated in prospectus<\/li>\n\n\n\n<li>Section 27 \u2013 Variation in terms or objects in prospectus<\/li>\n\n\n\n<li>Section 28 \u2013 Offer of sale by certain members of the company<\/li>\n\n\n\n<li>Section 29 \u2013 Public offer to be in dematerialised form<\/li>\n\n\n\n<li>Section 30 \u2013 Advertisement of prospectus<\/li>\n\n\n\n<li>Section 31 \u2013 Shelf prospectus<\/li>\n\n\n\n<li>Section 32 \u2013 Red herring prospectus<\/li>\n\n\n\n<li>Section 33 \u2013 Application forms for securities<\/li>\n\n\n\n<li>Section 34 \u2013 Criminal liability for misstatements in prospectus<\/li>\n\n\n\n<li>Section 35 \u2013 Civil liability for misstatements in prospectus<\/li>\n\n\n\n<li>Section 36 \u2013 Punishment for fraudulently inducing persons to invest money<\/li>\n\n\n\n<li>Section 37 \u2013 Action by affected persons<\/li>\n\n\n\n<li>Section 38 \u2013 Punishment for personation for acquisition of securities<\/li>\n\n\n\n<li>Section 39 \u2013 Allotment of securities by company<\/li>\n\n\n\n<li>Section 40 \u2013 Securities to be dealt with in stock exchanges<\/li>\n\n\n\n<li>Section 41 \u2013 Global Depository Receipt<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-part-ii-private-placement-section-42\">Part II \u2013 Private Placement (Section 42)<\/h3>\n\n\n\n<ol start=\"20\" class=\"wp-block-list\">\n<li>Section 42 \u2013 Issue of shares on private placement basis<\/li>\n<\/ol>\n\n\n\n<p class=\"has-text-align-center\"><strong><a href=\"https:\/\/www.oliveboard.in\/sebi-grade-a-pyqs\/?ref=contss-sebi-pyq\" target=\"_blank\" rel=\"noreferrer noopener\">Download SEBI Grade A 350+ PYQs with Solutions PDF<\/a><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-understanding-public-offer-and-private-placement\"><span class=\"ez-toc-section\" id=\"Understanding_Public_Offer_and_Private_Placement\"><\/span>Understanding Public Offer and Private Placement<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The details of the public offer and private placement are as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-1-what-is-a-public-offer\">1. What is a Public Offer?<\/h3>\n\n\n\n<p>A public offer means inviting the general public to buy the company\u2019s securities, usually through a prospectus.<br>It includes:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>Initial Public Offer (IPO)<\/strong> \u2013 When shares are offered for the first time.<\/li>\n\n\n\n<li><strong>Further Public Offer (FPO)<\/strong> \u2013 When a company that\u2019s already listed offers more shares.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-what-is-a-private-placement\">2. What is a Private Placement?<\/h3>\n\n\n\n<p>A private placement is when a company offers its securities to a selected group of investors, rather than the public. It is a more controlled and restricted way to raise funds.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/test-series\/?ref=contac-nai-act\" target=\"_blank\" rel=\"noreferrer noopener\">Attempt A Free Mock Test Today!<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-part-i-public-offer-sections-23-41\"><span class=\"ez-toc-section\" id=\"Part_I_%E2%80%93_Public_Offer_Sections_23%E2%80%9341\"><\/span>Part I \u2013 Public Offer (Sections 23\u201341)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The detailed notes related to Part I of the public offer are as follows:<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-23-public-offer-and-private-placement\">Section 23 \u2013 Public Offer and Private Placement<\/h3>\n\n\n\n<p>This section explains how:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Public companies can issue securities through a prospectus, private placement, or rights\/bonus issue.<\/li>\n\n\n\n<li>Private companies can issue securities only through private placement or rights\/bonus issue.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-24-power-of-sebi\">Section 24 \u2013 Power of SEBI<\/h3>\n\n\n\n<p>The Securities and Exchange Board of India (SEBI) regulates the issue and transfer of securities and cases of non-payment of dividends for listed or to-be-listed companies. The Central Government regulates unlisted companies. This division ensures proper regulatory control.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-25-offer-for-sale-to-be-deemed-prospectus\">Section 25 \u2013 Offer for Sale to be Deemed Prospectus<\/h3>\n\n\n\n<p>If a company issues securities to a person who then sells them to the public, the offer document is treated as a prospectus. This prevents companies from bypassing legal disclosure requirements.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><strong><a href=\"https:\/\/www.oliveboard.in\/important-economic-and-finance-terms\/?ref=contss-sebi-ne\" target=\"_blank\" rel=\"noreferrer noopener\">Download 100+ Important Economic and Finance Terms PDF<\/a><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-26-matters-to-be-stated-in-prospectus\">Section 26 \u2013 Matters to be Stated in Prospectus<\/h3>\n\n\n\n<p>A prospectus must contain complete and accurate details like:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>The company\u2019s financial information<\/li>\n\n\n\n<li>Details of directors and promoters<\/li>\n\n\n\n<li>Objects of the issue<\/li>\n\n\n\n<li>Risk factors and legal compliance statements<\/li>\n<\/ul>\n\n\n\n<p>Providing false or incomplete information can attract serious penalties.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-27-variation-in-terms-or-objects\">Section 27 \u2013 Variation in Terms or Objects<\/h3>\n\n\n\n<p>Once funds are raised, a company cannot change the use or purpose of funds (called \u201cobjects\u201d) without shareholder approval through a special resolution.<br>If changes occur, shareholders who disagree must be given an exit option at a fair value.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-28-offer-of-sale-by-certain-members\">Section 28 \u2013 Offer of Sale by Certain Members<\/h3>\n\n\n\n<p>Existing shareholders can sell their shares to the public, with the company\u2019s approval. The sale document is treated as a prospectus, ensuring the same level of investor protection.<\/p>\n\n\n\n<p class=\"has-text-align-center\"><a href=\"https:\/\/www.oliveboard.in\/sebi-grade-a-300-plus-mcqs\/?ref=contss-sebi-mcq\" target=\"_blank\" rel=\"noreferrer noopener\">Download SEBI Grade A 300+ MCQs Ebook<\/a><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-29-public-offer-in-dematerialised-form\">Section 29 \u2013 Public Offer in Dematerialised Form<\/h3>\n\n\n\n<p>All securities offered to the public must be in dematerialised (electronic) form.<br>This ensures transparency, faster transactions, and reduced risk of fraud.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-30-advertisement-of-prospectus\">Section 30 \u2013 Advertisement of Prospectus<\/h3>\n\n\n\n<p>When a company advertises its prospectus, the advertisement must include key details such as:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Company name<\/li>\n\n\n\n<li>Objectives of the issue<\/li>\n\n\n\n<li>Liability of members<\/li>\n\n\n\n<li>Capital structure<br>This ensures clarity for potential investors.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-31-shelf-prospectus\">Section 31 \u2013 Shelf Prospectus<\/h3>\n\n\n\n<p>A shelf prospectus allows a company to issue securities in multiple tranches within one year using a single prospectus. Each time the company issues securities, it files an information memorandum with updated details.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/previous-year-papers\/?ref=contac-aib-act\" target=\"_blank\" rel=\"noreferrer noopener\">Solve Free Previous Year Exam Papers Today!<\/a><\/div>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-32-red-herring-prospectus\">Section 32 \u2013 Red Herring Prospectus<\/h3>\n\n\n\n<p>A red herring prospectus is a preliminary version that doesn\u2019t include final pricing or quantity details. After the issue closes, the final prospectus (with all details) is submitted to the Registrar and SEBI.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-33-issue-of-application-forms\">Section 33 \u2013 Issue of Application Forms<\/h3>\n\n\n\n<p>Companies cannot issue an application form for securities without an abridged prospectus.<br>This ensures that investors receive essential information before investing.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-sections-34-amp-35-liabilities-for-misstatements\">Sections 34 &amp; 35 \u2013 Liabilities for Misstatements<\/h3>\n\n\n\n<p>If a prospectus contains false or misleading statements, those responsible can face:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Criminal liability under Section 34 (punishable under Section 447 for fraud).<\/li>\n\n\n\n<li>Civil liability under Section 35 (compensation for investor losses).<\/li>\n<\/ul>\n\n\n\n<p class=\"has-text-align-center\"><strong><a href=\"https:\/\/www.oliveboard.in\/120-plus-management-mcqs\/?ref=contss-sebi-ne\" target=\"_blank\" rel=\"noreferrer noopener\">Download 120+ Management MCQs Ebook<\/a><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-36-fraudulent-inducement\">Section 36 \u2013 Fraudulent Inducement<\/h3>\n\n\n\n<p>If a person intentionally gives false information to encourage someone to invest, it is a fraudulent act punishable under Section 447.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-37-action-by-affected-persons\">Section 37 \u2013 Action by Affected Persons<\/h3>\n\n\n\n<p>Investors who suffer losses because of misleading information in a prospectus can take legal action under Sections 34, 35, or 36.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-38-personation-for-acquisition-of-securities\">Section 38 \u2013 Personation for Acquisition of Securities<\/h3>\n\n\n\n<p>Applying for securities under a false or fictitious name is a serious offence. The person may face punishment under Section 447, and the court may transfer such securities to the Investor Education and Protection Fund (IEPF).<\/p>\n\n\n\n<p><strong>Get ready to crack government job exams with leading educators<\/strong><\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/www.oliveboard.in\/courses\/?ref=contac-nai-act\" target=\"_blank\" rel=\"noreferrer noopener\">Enroll in Online Live Classes Today!<\/a><\/div>\n<\/div>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-39-allotment-of-securities\">Section 39 \u2013 Allotment of Securities<\/h3>\n\n\n\n<p>A company must:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Receive at least the minimum subscription mentioned in the prospectus.<\/li>\n\n\n\n<li>Allot securities within 30 days (as per SEBI\u2019s rules).<\/li>\n\n\n\n<li>Refund the money if the subscription is incomplete.<\/li>\n\n\n\n<li>File a return of allotment with the Registrar.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-40-listing-of-securities\">Section 40 \u2013 Listing of Securities<\/h3>\n\n\n\n<p>Before making a public offer, a company must obtain approval from a recognised stock exchange. Funds raised must be kept in a separate bank account and used only for allotment or refund purposes. Violation of this rule can lead to heavy penalties.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-section-41-global-depository-receipts-gdrs\">Section 41 \u2013 Global Depository Receipts (GDRs)<\/h3>\n\n\n\n<p>Companies may issue <strong>Global Depository Receipts<\/strong> in foreign markets after passing a <strong>special resolution<\/strong> and following the prescribed rules.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-part-ii-private-placement-section-42-issue-of-shares-on-private-placement-basis\"><span class=\"ez-toc-section\" id=\"Part_II_%E2%80%93_Private_Placement_Section_42_%E2%80%93_Issue_of_Shares_on_Private_Placement_Basis\"><\/span>Part II \u2013 Private Placement (Section 42 \u2013 Issue of Shares on Private Placement Basis)<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Private placement means offering securities to a select group of investors instead of the public. It is a common way for startups and private companies to raise funds.<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Can be made to a maximum of 50 persons in a financial year (excluding QIBs and employees under ESOPs).<\/li>\n\n\n\n<li>Offers must be made through a private placement offer-cum-application form.<\/li>\n\n\n\n<li>Public advertisements are not allowed.<\/li>\n\n\n\n<li>Money received must be kept in a separate bank account until allotment.<\/li>\n\n\n\n<li>Allotment must be completed within 60 days.<\/li>\n\n\n\n<li>The company must file a return of allotment within 15 days.<\/li>\n\n\n\n<li>Non-compliance attracts penalties and refund with 12% interest.<\/li>\n<\/ul>\n\n\n\n<p>If the offer is made to more than the allowed number of investors, it will be treated as a public offer, and the company must follow all public issue requirements.<\/p>\n\n\n\n<p>Also Check:&nbsp;<a href=\"https:\/\/www.oliveboard.in\/upcoming-government-exams\/?ref=contac-acb\" target=\"_blank\" rel=\"noreferrer noopener\">What are the Upcoming Government Exams<\/a><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-download-companies-act-2013-free-pdf\"><span class=\"ez-toc-section\" id=\"Download_Companies_Act_2013_Free_PDF\"><\/span>Download Companies Act 2013 Free PDF<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Aspirants preparing for the UGC NET Commerce paper, SEBI Grade A exam, and various other government exams can download the complete details of the Companies Act, 2013 through the direct link provided below.<\/p>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-16018d1d wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/download.oliveboard.in\/pdf\/CompaniesAct2013.pdf\" target=\"_blank\" rel=\"noreferrer noopener\">Download Companies Act 2013 Free PDF<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-questions-based-on-companies-act-2013-chapter-3\"><span class=\"ez-toc-section\" id=\"Questions_Based_on_Companies_Act_2013_Chapter_3\"><\/span>Questions Based on Companies Act 2013, Chapter 3<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>1. Under which section of the Companies Act, 2013 is the distinction between public offer and private placement defined?<\/p>\n\n\n\n<p>A. Section 22<br>B. Section 23<br>C. Section 25<br>D. Section 27<br>E. Section 42<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Section 23<br><strong>Explanation:<\/strong> Section 23 defines the methods by which a company may issue securities \u2014 through public offer or private placement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-2-which-authority-regulates-the-issue-and-transfer-of-securities-for-listed-companies\">2. Which authority regulates the issue and transfer of securities for listed companies<\/h3>\n\n\n\n<p>A. Ministry of Corporate Affairs (MCA)<br>B. Registrar of Companies (ROC)<br>C. Securities and Exchange Board of India (SEBI)<br>D. Reserve Bank of India (RBI)<br>E. Central Government<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. SEBI<br><strong>Explanation:<\/strong> As per Section 24, SEBI regulates listed and proposed-to-be-listed companies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. A document issued to the public inviting them to subscribe for shares or debentures is known as\u2014<\/h3>\n\n\n\n<p>A. Memorandum of Association<br>B. Articles of Association<br>C. Prospectus<br>D. Offer Document<br>E. Letter of Allotment<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. Prospectus<br><strong>Explanation:<\/strong> A prospectus is a legal document inviting the public to invest in company securities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Matters to be stated in a prospectus are given under\u2014<\/h3>\n\n\n\n<p>A. Section 25<br>B. Section 26<br>C. Section 27<br>D. Section 28<br>E. Section 29<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Section 26<br><strong>Explanation:<\/strong> Section 26 specifies the information that must be included in a company\u2019s prospectus.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. A prospectus issued by certain members offering to sell shares to the public is known as\u2014<\/h3>\n\n\n\n<p>A. Red herring prospectus<br>B. Deemed prospectus<br>C. Shelf prospectus<br>D. Private placement offer<br>E. Offer document<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Deemed prospectus<br><strong>Explanation:<\/strong> As per Section 25, when a company allots securities to intermediaries who then sell them to the public, the offer document is treated as a deemed prospectus.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Which section deals with variation in terms of contracts or objects in a prospectus?<\/h3>\n\n\n\n<p>A. Section 26<br>B. Section 27<br>C. Section 28<br>D. Section 31<br>E. Section 35<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Section 27<br><strong>Explanation:<\/strong> Section 27 allows companies to vary terms of contracts or objects only with shareholder approval.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">7. Which section mandates that public offers of securities be in dematerialised form?<\/h3>\n\n\n\n<p>A. Section 29<br>B. Section 30<br>C. Section 32<br>D. Section 33<br>E. Section 41<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> A. Section 29<br><strong>Explanation:<\/strong> Section 29 requires every public offer of securities to be made in dematerialised (electronic) form.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">8. A shelf prospectus is issued by\u2014<\/h3>\n\n\n\n<p>A. Private companies<br>B. Listed companies<br>C. Public financial institutions or banks<br>D. SEBI<br>E. Government companies only<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. Public financial institutions or banks<br><strong>Explanation:<\/strong> Section 31 allows public financial institutions and banks to file a shelf prospectus valid for multiple issues.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">9. A red herring prospectus is used for\u2014<\/h3>\n\n\n\n<p>A. Private placements<br>B. Small issue offerings<br>C. Book building issues<br>D. Rights issues<br>E. Preferential allotments<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. Book building issues<br><strong>Explanation:<\/strong> As per Section 32, a red herring prospectus is filed before the price or quantity of securities is finalized.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">10. Civil liability for misstatement in a prospectus arises under\u2014<\/h3>\n\n\n\n<p>A. Section 33<br>B. Section 34<br>C. Section 35<br>D. Section 36<br>E. Section 38<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. Section 35<br><strong>Explanation:<\/strong> Section 35 provides for civil liability on directors and experts for misstatements in a prospectus.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">11. Criminal liability for misstatement in a prospectus is covered under\u2014<\/h3>\n\n\n\n<p>A. Section 34<br>B. Section 35<br>C. Section 36<br>D. Section 38<br>E. Section 40<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> A. Section 34<br><strong>Explanation:<\/strong> Section 34 prescribes criminal punishment for any person authorising the issue of a misleading prospectus.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">12. Fraudulently inducing persons to invest money is punishable under\u2014<\/h3>\n\n\n\n<p>A. Section 33<br>B. Section 36<br>C. Section 39<br>D. Section 41<br>E. Section 42<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Section 36<br><strong>Explanation:<\/strong> Section 36 deals with punishment for fraudulently inducing persons to invest money in company securities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">13. What is the minimum application money required before allotment of shares?<\/h3>\n\n\n\n<p>A. 2% of nominal value<br>B. 5% of nominal value<br>C. 10% of nominal value<br>D. 15% of nominal value<br>E. No limit prescribed<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. 10% of nominal value<br><strong>Explanation:<\/strong> As per Section 39, the minimum subscription (application money) must be at least 10% of the nominal value of securities.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">14. Securities of a company can be dealt with only on\u2014<\/h3>\n\n\n\n<p>A. The company\u2019s own portal<br>B. Recognised stock exchanges<br>C. Private platforms<br>D. SEBI\u2019s database<br>E. Company websites<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Recognised stock exchanges<br><strong>Explanation:<\/strong> Section 40 requires that securities be listed on a recognised stock exchange before being dealt with.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">15. Global Depository Receipts (GDRs) are governed under\u2014<\/h3>\n\n\n\n<p>A. Section 37<br>B. Section 39<br>C. Section 41<br>D. Section 42<br>E. Section 28<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. Section 41<br><strong>Explanation:<\/strong> Section 41 allows companies to issue Global Depository Receipts (GDRs) in foreign markets.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">16. The maximum number of persons allowed in a private placement (excluding QIBs and employees) is\u2014<\/h3>\n\n\n\n<p>A. 50<br>B. 100<br>C. 200<br>D. 500<br>E. Unlimited<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. 200<br><strong>Explanation:<\/strong> Section 42(2) restricts a private placement offer to a maximum of 200 persons in a financial year.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">17. Which document is issued to a select group of persons under private placement?<\/h3>\n\n\n\n<p>A. Prospectus<br>B. Offer letter (PAS-4)<br>C. Memorandum of offer<br>D. Offer of sale<br>E. Shelf prospectus<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Offer letter (PAS-4)<br><strong>Explanation:<\/strong> Section 42 mandates that a private placement must be made through an offer letter in Form PAS-4.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-18-if-a-company-allots-securities-to-more-than-200-persons-it-shall-be-deemed-as\">18. If a company allots securities to more than 200 persons, it shall be deemed as<\/h3>\n\n\n\n<p>A. Private placement<br>B. Preferential issue<br>C. Public offer<br>D. Rights issue<br>E. ESOP<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> C. Public offer<br><strong>Explanation:<\/strong> Any offer made to more than 200 persons is considered a public offer under Section 42.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">19. The penalty for contravention of provisions of private placement is\u2014<\/h3>\n\n\n\n<p>A. \u20b91 lakh<br>B. \u20b92 lakh<br>C. \u20b950 lakh or amount raised, whichever is lower<br>D. \u20b950 lakh or amount raised, whichever is higher<br>E. \u20b91 crore<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> D. \u20b950 lakh or amount raised, whichever is higher<br><strong>Explanation:<\/strong> As per Section 42(10), the company and its officers are liable to a penalty up to \u20b950 lakh or the amount involved, whichever is higher.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">20. The Companies Act, 2013 replaced which earlier law?<\/h3>\n\n\n\n<p>A. Companies Act, 1949<br>B. Companies Act, 1956<br>C. Indian Companies Ordinance, 1951<br>D. Companies Act, 1960<br>E. Business Corporations Act<\/p>\n\n\n\n<p><strong>Correct Answer:<\/strong> B. Companies Act, 1956<br><strong>Explanation:<\/strong> The Companies Act, 2013 replaced the Companies Act, 1956 as India\u2019s primary corporate law.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity\"\/>\n\n\n<ul class=\"wp-block-latest-posts__list is-grid columns-3 wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/negotiable-instruments-act\/\">Negotiable Instruments Act, 1881, FREE PDF &amp; Live Quiz<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/reserve-bank-of-india\/\">Role and Functions of the Reserve Bank of India (RBI) &#8211; UGC NET Notes<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/www.oliveboard.in\/blog\/sebi-grade-a-eligibility-check-tool\/\">Are You Eligible for SEBI Grade A 2026? 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It governs how companies are created, managed, and<\/p>\n","protected":false},"author":58,"featured_media":231701,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10247,8661,11846,16459],"tags":[],"class_list":["post-231697","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-rbi-sebi-nabard","category-sebi-prep","category-ugc-net-teaching-exams","category-ugc-net-commerce-study-material","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-50"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.6 (Yoast SEO v26.6) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Companies Act 2013 Chapter 3 Notes, Download Free PDF<\/title>\n<meta name=\"description\" content=\"Understand the essential provisions of Companies Act 2023 Chapter 3 regarding securities issuance and investor protection.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.oliveboard.in\/blog\/companies-act-2013-chapter-3\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Companies Act 2013 Chapter 3 Notes, Download Free PDF\" \/>\n<meta property=\"og:description\" content=\"The Companies Act, 2013 is one of India\u2019s most significant business laws. 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