PUNJAB TECHNICAL

UNIVERSITY

A
Project
On
“Public Issue & Type of Company”

In partial fulfillment of the requirement of two years full time

Masters of Business Administration (MBA) Program (2009-2011)

Of

Asian Business School, Noida 201301

UNDER THE GUIDENCE OF: SUBMITTED BY:

PROF.SOMUN GHOSH HEERA SINGH

3rd Semester

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 ACKNOWLEDGEMENT

I am indebted to a multitude of persons who have provided me with

valuable help during our endeavor of research. The project would not have

seen the illumination of the day without the efforts of the many who

managed the show in the wings. I am thankful to all people who have put in

great efforts and gave me guidance for the successful completion of the

project.

I am indeed grateful to Prof. Somun Ghosh for providing me the guidance,

advice, constructive suggestions and faith in my ability inspired to perform

well who gave me a valuable opportunity of involving me in studying this

project. Preparing a project of this nature is an arduous task and I am

fortunate enough to get support from a large number of people to whom we

shall always remain grateful.

Finally, I thank all those who directly and indirectly contributed to this

project.

Heera Singh

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 INTRODUCTION
Generally speaking, a company means a voluntary association of persons

that has been formed and registered under the Companies Act to carry on

some definite business and to share profits/losses of such business.

Most companies are usually started privately by their promoter(s).

However, the promoters' capital and the borrowings from banks and

financial institutions may not be sufficient for setting up or running the

business over a long term. So companies invite the public to contribute

towards the equity and issue shares to individual investors. The way to

invite share capital from the public is through a 'Public Issue'. Simply

stated, a public issue is an offer to the public to subscribe to the share

capital of a company. Once this is done, the company allots shares to the

applicants as per the prescribed rules and regulations laid down by SEBI. 

Public Company can invite the public to subscribe for its shares and

debentures and it also doesn’t restrict the transfer of shares.

Private Company can’t invite public for subscribing to any shares or

debentures of the company and it also restrict the rights of its members to

transfer shares..
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Various Types of Issues by Indian Companies!
Primarily, issues made by an Indian company can be classified as Public,

Rights, Bonus and Private Placement. While right issues by a listed

company and public issues involve a detailed procedure, bonus issues and

private placements are relatively simpler. The classification of issues is as

illustrated below:

When an issue / offer of securities is made to new investors for becoming

part of shareholders’ family of the issuer3 it is called a public issue. Public

issue can be further classified into Initial public offer (IPO) and Further

public offer (FPO). The significant features of each type of public issue are

illustrated below:

(i) Initial public offer (IPO): When an unlisted company makes either a

fresh issue of securities or offers its existing securities for sale or both for

the first time to the public, it is called an IPO. This paves way for listing and

trading of the issuer’s securities in the Stock Exchanges.

(ii) Further public offer (FPO) or Follow on offer: When an already listed

company makes either a fresh issue of securities to the public or an offer

for sale to the public, it is called a FPO.

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(b) Rights issue (RI):

When an issue of securities is made by an issuer to its shareholders

existing as on a particular date fixed by the issuer (i.e. record date), it is

called an rights issue. The rights are offered in a particular ratio to the

number of securities held as on the record date.

(c) Bonus issue:

When an issuer makes an issue of securities to its existing shareholders as

on a record date, without any consideration from them, it is called a bonus

issue. The shares are issued out of the Company’s free reserve or share

premium account in a particular ratio to the number of securities held on a

record date.

(d) Private placement:

When an issuer makes an issue of securities to a select group of persons

not exceeding 49, and which is neither a rights issue nor a public issue, it is

called a private placement. Private placement of shares or convertible

securities by listed issuer can be of two types:

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(i) Preferential allotment: When a listed issuer issues shares or

convertible securities, to a select group of persons in terms of provisions of

Chapter XIII of SEBI (DIP) guidelines, it is called a preferential allotment.

The issuer is required to comply with various provisions which inter‐alia

include pricing, disclosures in the notice, lock‐in etc, in addition to the

requirements specified in the Companies Act.

(ii) Qualified institutions placement (QIP): When a listed issuer issues

equity shares or securities convertible in to equity shares to Qualified

Institutions Buyers only in terms of provisions of Chapter XIIIA of SEBI

(DIP) guidelines, it is called a QIP.

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Company!

According to Section 3(1) [(i) and (ii)] of the Indian Companies Act, “A

Company means a company formed and registered under any of the

previous Company Law. Thus a company has to be formed and registered

either under the present Act or under any previous Act.

Prof. Haney opined that “a company is an artificial person, created by law,

having separate entity, with a perpetual succession and common seal.”

Features of a Company

1. Registration under Companies Act

2. Independence Existence

3. Perpetual Succession

4. Common Seal

5. Ownership and management are different

6. Registered office

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Types of Companies

Indian Companies may be broadly classified :(i)On the basis of their

formation;(2)on the basis of liability of their members;(3)on the basis of

nature of ownership; and (4)on the basis of listing.

1.On the basis of their formation:

These may be classified further as:

(a)Statutory Companies: Which are formed and run following special

Acts, like Banking Companies, Insurance Companies, etc.

(b)Registered Companies: These are formed and registered following the

Companies Act, 1956[or earlier relevant Acts].

Registered Companies may again classified as –

(i) Private Company : Whose minimum paid up capital should be

Rs.100,000(or higher as may be prescribed by Central

government)and which by its Articles of association –

 Restricts the rights of its members to transfer shares.

 Limits the number of its member to 50(other than employees

and ex-employees remaining members).

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  Prohibits any public invitation for subscribing to any shares

or debenture of the company; and

 Prohibits any invitation or acceptance of deposits from any

one other tan its members, directors or their relatives.

(ii)Public Company: Which invites the public to subscribe for its share and

debentures and which doesn’t restrict the transfer of shares. Its minimum

paid-up capital should be Rs.5, 00,000.

2.On the basis of liabilities of their members:

Here the companies may be subdivided further as –

(a)Limited by Shares: The liabilities of the shareholder doesn’t exceed

unpaid amount (if any) on respective shareholding.

(b)Unlimited Companies: The liabilities have no limit. Shareholders may be

required to pay off the creditor’s dues.

(c)Limited by Guarantee: The shareholders liability is limited to the amount

for which they undertake to contribute in case of winding up.

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3. On the basis of Ownership:

Here the companies may be further classified as-

(a)Government Company: In which 51% or more of shares held by any

state Government or by both of them.

(b)Foreign Company: Which has a place of business in India but which

has been incorporated outside India?

(c)Holding Company: Which is a controlling Company .The Company

controlled is called a subsidiary Company .Te control results either due to

acquiring more than 50%of the equity share of the subsidiary company or

due to controlling the composition of Board Of Directors there or due to

controlling the subsidiary company which is again controlling some other

company.

4. On the basis of listing:

A Company whose securities are not listed with the stock Exchanges are

called Unlisted Companies. The securities remain listed for listed

companies.

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 Bibliography

1. Corporate Accounting – Prof. Amitabha Basu

2. www.investopedia.com

3. www.sharegyan.com

4. www.wikipedia.com

5. www.livemint.com

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