Prospectus

                                                

A public company, but not a private company, is entitled, by issuing a prospectus, to invite applications for its shares or debentures. Prospectus is defined by section 2(70) as “Prospectus means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for subscription or purchase of any securities of a body corporate.”

Application forms for securities cannot be issued unless they are accompanied by a memorandum containing such salient features of a prospectus as may be prescribed. This is known as abridged prospectus. The purpose is to reduce the expense-burden of a public issue. The full “prospectus” has to be maintained in the office of the company and a copy of it has to be supplied, when demanded by a person before closing of the subscription test.

A copy of the prospectus has to be given to a person who requests for it before closing of the offer and the subscription list. A public company mayissue securities to public through prospectus (to be referred to as “public offer” by complying with the provisions of part I of chapter III on prospectus and Allotment of securities).It may also be done through private placement by complying with the provisions of part II and chapter III. It may also be done through right issue or bonus issue by complying with the provisions of the act and in case of listed companies by complying with the provisions of the SEBI Act, 1992, and rules and regulations made under it.

According to section 25 of the companies act,2013 where a company allots or agrees to allot any securities of the company with a view to those securities being offered for sale to the public, any document by which the offer for sale is made to the public is to be deemed for all purpose as a prospectus issued by the company. Section 26 which provides for matters to be stated in the prospectus is applicable to the offer for sale with the following additional requirements: (a)a statement of the net amount received or to be received as consideration for the securities to which the offer relates;(b)the time and place at which the underlying contract for allotment may be inspected; and (c)the person making the offer were named in the prospectus as directors of the company.

Declaration : By the companies (Amendment) Act,2017 , the prospectus shall make a declaration about the compliance of the provisions of companies act and a statement to the effect that nothing in the prospectus is countrary to the provisions of companies act.

Reference:

  1. Company Law – Avtar Singh – Eastern Book Company
  2. https://tavaga.com

Aishwarya Says:

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IF YOU ARE INTERESTED IN PARTICIPATING IN THE SAME, DO LET ME KNOW.

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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 secondinnings.hr@gmail.com

In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

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