Section 28 of the Companies Act, 2013: Offer of Sale of Shares by Certain Members of a Company
Section 28 permits certain members of a company, in consultation with its Board of Directors, to offer all or part of their existing shareholding to the public in accordance with the prescribed procedure and other applicable law. The provision is important because the offer document is treated as a prospectus issued by the company, bringing prospectus disclosure and liability rules into operation.
Law reviewed: 16 September 2026. The statutory text should be read with the Companies (Prospectus and Allotment of Securities) Rules, 2014 and, where applicable, SEBI requirements.
What does Section 28 provide?
Section 28(1) - Public offer by existing members
Where certain members propose, in consultation with the Board of Directors, to offer the whole or part of their shareholding to the public in accordance with applicable law, the offer may be made by following the prescribed procedure.
Section 28(2) - Offer document treated as a prospectus
The document through which the shares are offered for sale to the public is deemed to be a prospectus issued by the company. Consequently, legal requirements concerning prospectus contents, mis-statements, omissions and other prospectus-related liabilities apply as though the company itself had issued that prospectus.
Section 28(3) - Authority and reimbursement
The selling members, whether individuals, bodies corporate or both, must collectively authorise the company to take the necessary actions for the offer on their behalf. They must also reimburse the company for the expenses incurred in connection with the offer.
Meaning of "prospectus"
Section 2(70) of the Companies Act, 2013 broadly defines a prospectus to include a document described or issued as a prospectus and specified forms of documents inviting offers from the public for the subscription or purchase of securities of a body corporate. Under Section 28(2), the offer document used by selling members receives the legal treatment of a company prospectus even though the shares being sold are existing shares held by those members.
Rule 8: Procedure for an offer of sale by members
Rule 8 of the Companies (Prospectus and Allotment of Securities) Rules, 2014 applies the provisions of Part I of Chapter III of the Companies Act, 2013 and the rules made under it to an offer under Section 28, subject to specified exceptions.
| Rule 8 requirement | Effect |
|---|---|
| Part I of Chapter III generally applies | The offer is governed by the statutory framework concerning prospectus and allotment of securities, subject to the Rule 8 exceptions. |
| Minimum subscription provisions excluded | The provisions relating to minimum subscription do not apply to a Section 28 offer of sale. |
| Minimum application value provisions excluded | Requirements concerning minimum application value are excluded for this purpose. |
| Board statement on utilisation of money excluded | A Board statement concerning utilisation of issue proceeds is not required in the same manner because the sale proceeds relate to shares sold by existing members. |
| Unavailable information | Other information that the offeror cannot compile or gather may be omitted only with detailed justification for the inability to comply. |
| Cost disclosure | The prospectus must disclose the person, persons or entity bearing the cost of the offer of sale and the reasons for that arrangement. |
Key compliance points under Section 28
- The shares offered are existing shares held by members; Section 28 is therefore distinct from a fresh issue of securities by the company.
- The selling members should consult the Board of Directors before proceeding with the public offer contemplated by Section 28.
- The selling members must collectively authorise the company to act for them in relation to the offer.
- The offer document is deemed to be a prospectus, so applicable disclosure standards and liability for mis-statements or omissions must be considered carefully.
- The selling members must reimburse the company for expenses incurred in connection with the offer.
- The prospectus must identify who bears the cost of the offer and state the reasons.
- Where securities-market law applies, the Companies Act requirements must be read together with the applicable SEBI regulations, circulars and stock-exchange requirements.
Prospectus liability in an offer of sale
Because Section 28(2) deems the offer document to be a prospectus issued by the company, the statutory provisions governing prospectus contents and liability for untrue or misleading statements and material omissions become relevant. This makes accuracy, completeness and verification of the offer document central to compliance. Related provisions include Section 26 on matters to be stated in a prospectus, Section 34 on criminal liability for mis-statements and Section 35 on civil liability for mis-statements.
Official legal resources
For the authoritative statutory framework, refer to the Companies Act, 2013 published by the Ministry of Corporate Affairs. For securities-market requirements and current circulars relevant to the stock-exchange OFS mechanism, refer to the Securities and Exchange Board of India - Offer for Sale resources.
Frequently asked questions
Can a member sell only part of the shareholding under Section 28?
Yes. Section 28(1) contemplates an offer of the whole or part of the member's holding of shares to the public, subject to the prescribed procedure and applicable law.
Is the offer document a prospectus?
Yes. Section 28(2) expressly treats the document by which the offer of sale to the public is made as a prospectus issued by the company for the purposes of the applicable prospectus laws and rules.
Who pays the expenses of the offer?
Section 28(3) requires the selling members to reimburse the company for expenses incurred by it in connection with the offer. Rule 8 also requires disclosure in the prospectus of the person or entity bearing the cost and the reasons.
Do all prospectus requirements apply without exception?
No. Rule 8 applies Part I of Chapter III and the related rules but specifically excludes requirements concerning minimum subscription, minimum application value and the Board's statement on utilisation of money, together with certain information that the offeror cannot compile or gather where detailed justification is provided.
This page is a general legal information resource. For a specific transaction, the current Act, rules, SEBI framework, stock-exchange requirements and professional advice should be considered together.