VARIANTS OF PROSPECTUS (Companies Act, 2013)

In our last blog post Prospectus (Companies Act 2013) , we discussed provisions related to prospectus. We will continue our study in this post.

ADVERTISEMENT OF PROSPECTUS (SECTION 30):

When a company issue an advertisement of prospectus, the advertisement shall specify contents of its memorandum; the objects, the liability of members, amount of share capital, name of signatories, and number of shares subscribed for by these signatories and its capital structure.

SHELF PROSPECTUS (SECTION 31):

Any class of company may file a shelf prospectus with the Registrar of Companies at the stage of first offer of securities.

“Shelf prospectus” means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.

The shelf prospectus shall indicate that validate period of the shelf prospectus is a period not exceeding one year from the date of first offer of securities under that prospectus. Once, a shelf prospectus has been issued, there will be no requirement of any further prospectus for any subsequent offer of these securities issued during this validity period.

For any subsequent issue, company shall file an “Information Memorandum”. This information memorandum shall contain all material facts relating to (i) new charges created; and (ii) changes in financial position of the company from first/previous offer to this second/subsequent offer under this Shelf Prospectus.

It may be possible that a company or any other person has received an application and advance payment of subscription before any material changes like new charges or financial position. In these cases, the company or that other person shall intimate these changes to the applicants. If they express a desire to withdraw their application, the company or other person shall refund all the money received as share application money for subscription within fifteen days.

When an offer of securities is made on shelf prospectus, the information memorandum together with shelf prospectus shall be deemed to be a prospectus.

RED HERRING PROSPECTUS (SECTION 32):

A company may issue a red herring prospectus before the issue of a prospectus.

“Red herring prospectus” means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.

The company shall file red herring prospectus with Registrar of companies at least three days before the opening of the subscription list and the offer.

A red herring prospectus shall carry the same obligation as are applicable to a prospectus. In case there is any variation between red herring prospectus and a prospectus shall be highlighted as variation in the prospectus.

Upon the closing of the offer of securities, the prospectus shall be filed with the Registrar and the Securities and Exchange Board of India. This prospectus shall state (a) total capital raised, (b) whether debt capital or share capital, (c) closing price of the securities and (d) any other details not included in red herring prospectus.

ISSUE OF APPLICATION FORMS AND ABRIDGE PROSPECTUS (SECTION 33):

Every application form for the purchase of the securities of a company shall be issued unless the form is accompanied by an “Abridge Prospectus”.

There is no need for abridge prospectus in case of:

a)    Underwriting Agreement; and

b)   Private placement.

Any person may make a request for a copy of the prospectus before closing of the subscription list and the offer. The company shall furnish a copy to him.

Any default in under this section, company shall be liable to a penalty of fifty thousand rupees for each default.

In our next post, we will discuss matters related to issue and allotment of securities.

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Related articles

• PROSPECTUS (Companies Act 2013) (aishmghrana.me)
• PUBLIC OFFER AND PRIVATE PLACEMENT (Companies Act 2013): (aishmghrana.me)