REGISTRATION AND ISSUE OF PROSPECTUS

ABSTRACT
Corporate Law, also inferred as Company Law or Business law is a body that regulates the rights and code of companies organizations and businessmen. Any advertisement offering shares or debentures of the company for sale to the public is a prospectus. The law is aimed at easing the process of doing business in India and improving corporate governance by making companies more accountable.

Section 2(70) of the Companies Act 2013 defines Prospectus as “any document issued for advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate”.

A Prospectus is an invitation issued to the public to offer for purchase/subscribe shares or debentures of the company. In other words, any advertisement offering shares or debentures of the company Private limited companies are strictly prohibited from issuing a prospectus and they cannot invite the public to subscribe to their shares. A prospectus can only be issued by public limited institutions. Making it an open invitation prolonged to the public at large.

INTRODUCTION
The Companies Act, 2013 defines a prospectus under section 2(70). Prospectus can be defined as “any document which is described or issued as a prospectus”. This also includes any notice, circular, advertisement or any other document acting as an invitation to offers from the public. Such an invitation to offer should be for the purchase of any securities of a corporate body. Shelf prospectus and red herring prospectus are also considered as a prospectus.

Essentials for a document to be called as a prospectus:
For any document to considered as a prospectus, it should satisfy two conditions.
The document should invite the subscription to public share or debentures, or it should invite deposits.
Such an invitation should be made to the public.
The invitation should be made by the company or on the behalf company.
The invitation should relate to shares, debentures or such other instruments.

PROSPECTUS
Prospectus meaning
The prospectus is a legal document, which outlines the company’s financial securities for sale to the investors.
According to the companies act 2013, there are four types of the prospectus, abridged prospectus, deemed prospectus, red herring prospectus, and shelf prospectus.
Prospectus Definition
The prospectus is a legal document for market participants and investors to pursue, detailing the features, prospects, and promise of a financial product.
It is mandated by the law to be supplied to prospective customers.
Prospectus Example
In an IPO, the prospectus tells potential shareholders about the company’s plans and business model.
For insurance and investment fund customers, a prospectus lists out the objective of the product, inclusions, and exclusions, fees, etc.
For an ETF, a prospectus informs likely investors of the fund’s goals, history, portfolio, fees and costs, and other financial details.
What is a Prospectus and its importance?
The company provides prospectus with capital raising intention. Prospectus helps the investors to make a well-informed decision because of the prospectus all the required information of the securities which are offered to the public for sale.

Whenever the company issues the prospectus, the company must file it with the regulator. The prospectus includes the details of the company’s business, financial statements.

To notify the public of the issue
To put the company on record with regards to the terms of the issue and allotment process
To establish accountability on the part of the directors and promoters of the company
Types of prospectus
According to Companies Act 2013, there are four types of prospectus.
Deemed Prospectus – Deemed prospectus has mentioned under Companies Act, 2013 Section 25 (1). When a company allows or agrees to allot any securities of the company, the document is considered as a deemed prospectus via which the offer is made to investors. Any document which offers the sale of securities to the public is deemed to be a prospectus by implication of law.

Red Herring Prospectus – Red herring prospectus does not contain all information about the prices of securities offered and the number of securities to be issued. According to the act, the firm should issue this prospectus to the registrar at least three before the opening of the offer and subscription list.

Shelf prospectus – Shelf prospectus is stated under section 31 of the Companies Act, 2013. Shelf prospectus is issued when a company or any public financial institution offers one or more securities to the public. A company shall provide a validity period of the prospectus, which should not be more than one year. The validity period starts with the commencement of the first offer. There is no need for a prospectus on further offers. The organization must provide an information memorandum when filing the shelf prospectus.

Abridged Prospectus – Abridged prospectus is a memorandum, containing all salient features of the prospectus as specified by SEBI. This type of prospectus includes all the information in brief, which gives a summary to the investor to make further decisions. A company cannot issue an application form for the purchase of securities unless an abridged prospectus accompanies such a form.

REGISTRATION AND ISSUE OF PROSPECTUS

Registration of prospectus
Section 60 of the 1956 Act, which deals with registration of prospectus also corresponds to section 26 of the 2013 Act. The need for company registration is explained by the company law committee: This section deals with the registration of prospectus and follow section 41 of the English Act in important respects. We have also made certain additions by providing that where a prospectus names any person as auditor, attorney, solicitor, banker or broker of the company, the written consent of those person should be filed at the time of company registration. We would point out that the mere giving of this consent would not subject such persons to any liability unless any of them is acting as an expert. The need for the above provisions arises out of the necessary for circumspection on the part of these persons before they permit their names to be cited in a prospectus. They should be remember that the public attaches importance to the presence of well known and respected names on the face of a prospectus and they should be careful not to allow themselves to be associated with the enterprises about whose merits they have not made some serious enquiry. Sub-section (4) prohibits the issue of a prospectus more than 90 days after it had been filed with the Registrar. The English Act contains no such restriction, but we think it is desirable to insert such a provision of the company. If the issue is too long delayed, conditions may alter and what appears in the prospectus when registered may no longer be valid at the end of such a long period.

Section 60(3) of the 1956 Act was amended by the Companies (Amendment) Act, 1960 for reasons explained thus “Section 60 provides that no prospectus shall be issued unless, on or before the date of its publication, there has been delivered to the registrar for Company registration of a copy thereof signed by the persons named therein as directors or proposed directors of the company. It may not always be possible for companies to file the prospectus with the Registrar on the same date as it bears. In practice, it appears that prospectus are prepared and printed a few days previous to the date they bear. There is nothing objectionable in a prospectus bearing a date posterior to its presentation for company registration.

It appears that in some cases Registrars have refused to register prospectuses on grounds other than those referred to in section 60(3)(a) and (b). In our opinion, it should not be within the province of the Registrar to refuse registration of a prospectus on the ground that the company is directly or indirectly contravening the policy of the Act of that its business is sought to be carried on in a manner contrary to law thought it will be in order for him to point out the defects in the documents on security.”

Section 60(6) of the 1956 Act was amended and penalty was enhanced by the Companies (Amendment) Act, 2000. The Companies (Amendment) Act, 2000 also empowered SEBI to administer the provisions of section 55 of the 1956 Act in relation to listed companies and those which intended to get listed; However, the provision relating to all other companies were to be administered by the Central Government. The Companies (Amendment) Act, 2000 also vested in SEBI the power to inspect books of account and other books and papers with respect to listed companies and the companies which intended to get listed. SEBI was also authorized to file complaints under section 621 of the 1956 Act for offences relating to issue and transfer of securities and non-payment of dividend.

Issue of prospectus after registration
It is obligatory to issue a prospectus, containing the prescribed particulars, except when the shares are not offered to the public, or when the shares are offered to existing shareholders as rights issue, or when the issue relates to shares which are in all respects uniform with shares previously issued and quoted in a stock exchange. In the case of rights issue without any rights to renounce and in which the shares remaining unsubscribed by the existing shareholders of the company, are not to be offered to the public, having regard to the provisions of section 67 (3) of the 1956 Act. Offer of shares to the public without complying with the provisions of section 59 of the 1956 Act is a violation.

When prospectus is not required to be issued
It would appear that the issue of a prospectus is not necessary in the following cases:
When shares or debentures are provided to already existing shareholders or debenture holders of the company.

When the issue with respect to shares or debentures uniform in all respects with shares or debentures previously issued and dealt in or quoted in a recognized stock exchange.
Where a person is invited to enter into an underwriting agreement.
Where shares are not offered to the public, for example when shares are placed privately to less than 50 persons.

CONCLUSION
A prospectus is basically a formal and legal document issued by a body corporate which acts for inviting offers from the public for subscription or purchase of any securities. Every public company is entitled to issue the prospectus for its shares or debentures. But, the same is not required for a private company.

A prospectus for being a valid one it must contain essential requisites and it must be registered. If any prospectus is not registered, it is considered as an invalid one and with contravention to provisions laid down for the valid prospectus.

Whenever the advertisement if the prospectus is made, it must contain the memorandum of the company. When a company is making a proposal for an offer of securities, then prior to issuing a prospectus, it may issue a red herring prospectus. A company can also issue a shelf prospectus when it has to make an offer one or more securities or class of securities and then it does not have to issue a prospectus before issuing an offer of each security.

So, a prospectus plays an important role for any public company and it must be under the provisions laid down under the Companies Act 2013.

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WEB SOURCES
https://blog.ipleaders.in/concept-prospectus-companies-act-2013/#:~:text=The%20Companies%20Act%2C%202013%20defines,to%20offers%20from%20the%20public
https://solubilisseo.medium.com/registration-of-prospectus-of-a-company-4c0bc0751d80
https://tavaga.com/tavagapedia/prospectus/

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