Prospectus – Company Law – Part 1

In Company Law, prospectus plays a significant role, where it contains all the material information (General, Financial & Statutory) of the company i.e., prices and shares detail of the specific company, which helps the general public who wishes to shop for a share therein specific company. As the prospectus may be a legally mandated document it must be registered under Register of companies.


1. To bring back the notice of the general public that a replacement company has been formed.

2. To preserve authentic record of the terms and allotment on which the general public are invited to shop for its shares or debentures.

3. To secure that the administrators of the corporate accept responsibility for the statements within the prospectus.


To consider the certain document sort of a prospectus following essentials are must:

1. The document should invite the general public for the subscription of shares.

2. It must be made to the general public.

3. It must be made by the company.

4. It should relate to shares, debentures, and such other information pertaining to the company.


The issue of the prospectus is defined under section 26 of Companies Act, 2013:

1. If a company does not issue prospectus before 90 days from the date from which a copy was delivered before the registrar, then it is considered to be invalid.

2. If a prospectus was issued in contravention under section 26 of Companies Act, 2013 then the company can be punished with a fine of 50,000/- which may exceed up to 3,00,000/-.


The golden rule for the framing of the prospectus was laid down in the case of New Brunswick & Canada Railway & Land Co. vs. Muggeridge by Justice Kindersely.

It was held that those who issue prospectus have great advantages. Public is invited to take shares on the faith of the representations contained on the prospectus. The public is at the mercy of the Company promoters .Everything must therefore be stated with accuracy. Nothing should be stated as a fact which is not so and no fact should be omitted the existence of which might in any degree affect the nature of the principles and the advantage which prospectus hold out. In brief true nature of the company should be disclosed.


Every prospectus must be dated and signed and shall state such information and set out such reports on financial information as may be specified by SEBI in consultation with the Central Government.

26(2): The provision of the section 26(1) shall not apply in the following cases:

• If prospectus if issued to existing members or debenture-holders of a company or

• If prospectus issued relating to shares or debentures which are in all respect uniform with shares or debentures previously issued and for the time being dealt in stock exchange.

26(3): The date indicated in the prospectus shall be deemed to be the date of its publication.

26(4): Prospectus shall not be issued unless a signed copy of such has been delivered to the registrar for filing. It shall be signed by every director or proposed director or duly authorised attorney.

26(5): A prospectus issued under section 26(1) shall not include a statement purporting to be made by an expert:

Unless the expert isn’t engaged or curious about the formation or promotion or management of the corporate

1. The expert has given written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy if the prospectus to the registrar for filing and,

2. a statement to that effect shall be included in the prospectus

26(6): Every prospectus issued shall on the face of it,

1. state that a copy has been delivered for the filing to the registrar and

2. Specify the documents required by section 26 to be attached to the copy so delivered or refer to the statement included in the prospectuses which specify these documents.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

You may also like to read:

Importance of Play and Development skills for children

My first Day in Court

Puja and Politics

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.