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Companies Act

Details about different types of Prospectus under Companies Act 2013

April 1, 2020 by Team Instabizfilings

Blog Details

> According to Section 2(1) of the Act “Abridged Prospectus” is a prospectus which means a memorandum containing salient features of prospectus as may be specified by the Securities Exchange Board of India by making regulation in this behalf.

 

> Section 33 of the Act provides that no form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an abridged prospectus shall, on a request being made by any person before the closing of the subscription list and the offer, be furnished to him.

 

> Nothing aforesaid shall apply if it is shown that the form of application was issued-

 

- In connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to such securities; or

- In relation to securities which were not offered to the public.

> The penal provisions provide that a Company which makes any default in complying with the provisions shall be liable to a penalty of fifty thousand rupees for each default.

 

>Section 33 provides that no application form of the Company shall be issued unless it is attached / annexed with abridged prospectus.

 

RED HERRING POSPECTUS (SECTION 32)

> Red Herring Prospectus means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.

> In simple terms a red herring prospectus contains most of the information pertaining to the company’s operations and prospects, but does not  include key details of the issue such as its price and the number of shares offered.

> According to section 32 a Company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus. Such Company proposing to issue a red herring prospectus shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer.

> Upon closing of offer the Company shall file a prospectus which includes the total  capital raised, the closing price of securities and such offer details which ever not mentioned in the red herring prospectus.

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

 

Shelf Prospectus

(1) Any class or classes of companies, as the Securities and Exchange Board may provide by regulations in this behalf, may file a shelf prospectus with the Registrar at the stage of the first offer of securities included therein which shall indicate a period not exceeding one year as the period of validity of such prospectus which shall commence from the date of opening of the first offer of securities under that prospectus, and in respect of a second or subsequent offer of such securities issued during the period of validity of that prospectus, no further prospectus is required.

 

(2) A company filing a shelf prospectus shall be required to file an information memorandum containing all material facts relating to new charges created, changes in the financial position of the company as have occurred between the first offer of securities or the previous offer of securities and the succeeding offer of securities and such other changes as may be prescribed, with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus:

 

Provided that where a company or any other person has received applications for the allotment of securities along with advance payments of subscription before the making of any such change, the company or other person shall intimate the changes to such applicants and if they express a desire to withdraw their application, the company or other person shall refund all the monies received as subscription within fifteen days thereof.

 

(3) Where an information memorandum then filed, every time an offer of securities thus made under sub-section (2), such memorandum together with the shelf prospectus shall deemed as prospectus.

Explanation.—For the purposes of this section, the expression “shelf prospectus” means a prospectus in respect of which the securities or class of securities included therein hence issued for subscription in one or more issues over a certain period without the issue of a further prospectus.

 


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