Prospectus is any document by which a company invites the applications for the issue of its shares or debentures. As per the Companies Act, a prospectus is any document described or issued as such and also includes red herring prospectus referred to in Section 32 or a shelf prospectus referred in Section 31 or any notice, or circular or advertisement or other document which invites the public for subscription or purchase of securities of a company.
Contents of a Prospectus
Following are the contents of a prospectus:-
- The prospectus must be dated and signed
- The prospectus should have the name and address of the registered office of the company, Chief Financial Officer, auditors, legal advisors, company secretary, bankers, trustees and such other persons as may be prescribed
- The prospectus should have the opening and closing date of the issue and of the allotment letters and refunds in prescribed time
- Main objective of the public offer, terms of issue and other particulars which may be prescribed
- Should contain the main object and present business of the company along with the location of the company
- Prospectus should contain the disclosures of the sources of the promoter’s contribution in the prescribed manner
- Every prospectus issued should state that a copy has been sent to the Registrar for registration.
Apart from the above contents, any other contents which may be prescribed are also included in the prospectus in the prescribed manner.
Kinds of Prospectus
A prospectus is of various kinds. Some of them are as follows:-
- Shelf Prospectus
A shelf prospectus is a prospectus which is issued by any class or companies prescribed by SEBI for one or more issues of securities, without the issue of a new prospectus. A shelf prospectus is issued when a company offers one or more securities to the public. The validity period of a shelf prospectus is not more than one year. Usually, a shelf prospectus is issued by banks and financial institutions. In case of any changes in the issue, it needs to be given in the Information Memorandum.
- Red Herring Prospectus
A red herring prospectus is a prospectus which does not includes the full details of the price or quantum of securities to be issued. A red herring prospectus needs to be filed with the Registrar at least 3 days prior to the opening of subscription list. A red herring prospectus is not a final prospectus as the company has the option to update it several times before issuing the final document.
- Deemed Prospectus
A deemed prospectus is any document by which the offer of securities is made to the public. Any document by which the shares or securities are offered to the public is called to be deemed prospectus.
- Abridged Prospectus
An abridged prospectus is any prospectus which contains the information of the company in brief. An abridged prospectus is a memorandum which contains the salient features of the prospectus. Every company when issuing application for the purchase of the securities needs to issue abridged prospectus along with such application. However, an abridged prospectus is not required if the securities are not offered to the public or in case of underwriting agreement.
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If you are interested in participating in the same, do let me know.
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