Generally there are two types of company i.e. public company and private company. A private company is closely held company with limitation as to transfer of its shares and number of members. Of a public company can transfer shares easily and there is no restrictions as to maximum number of members.
A public limited company can also invite initial public offer (IPO) to augment its capital and financial resources. IPO is the first issuance of a company's shares to the general public. These shares are allowed to be transacted in the stock market where they can be brought and sold
The securities and exchange board of India (SEBI) is now considering a proposal to allow the companies to sell shares through an all electronic initial public offer (E-IPO), wherein investors would be able to bid for shares electronically and without the need for signing any papers physically. This could also be used as a mean to provide an exit to companies which are listed exclusively on defunct exchanges.
This proposal intends to fast-track the IPO process and lowers the costs with the aid of technology. However, this is just a proposal of SEBI as this requires a formal clearance from the Ministry of Corporate Affairs for the e-IPO process.
Further, implementation of this E-IPO norm would require amending many laws, including the Companies Act of India. The amendment would be required to dispense with the requirements of an investor to "agree in writing", since no application form submission is envisaged in the e-IPO process, as the allotment will be in demat account.
To further reduce the paper formalities, SEBI has also proposed to dispense with attachment of certain documents with the IPO by the companies. However, there are many techno legal issues that have been ignored by SEBI and MCA. To avoid procedural hassles and legal issues it would be prudent to take care of these techno legal issues as well. Otherwise this is a good step in the right direction.
