We all know that; a public company runs successfully when it gets funds from the public. To invite public for subscribing shares or debentures, a company needs prospectus. The prospectus of a company includes all significant information of the company, its history and future plans. Through this prospectus, the public will come to know about the company and they will decide whether to purchase or not to purchase shares or debentures of the public company. Section 2(70) of the Companies Act, 2013, not only tells us about the Shelf Prospectus (section 31) but also about Red Herring prospectus (section 32). In this article we will be dealing with ‘Shelf Prospectus’. Before that we must know about some basic features of ‘prospectus’. So, let’s take a look at the details of the prospectus.

The most important objective of the prospectus is that, to attract the investors and persuade them to invest in the company by buying debentures or shares.
Section 2(70) of the Companies Act defines that, ―” 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 the subscription or purchase of any securities of body
In short it is the document that invite offers from public for subscribing shares or debentures of a company. Only public companies are allowed to invite subscription from the public. A private company is not allowed to invite subscriptions from the public. Prospectus should be in a written format. Advertisement or oral communication about the company are not prospectus. In a way,
prospectus can be seen as a controlled advertisement. It is formal and the official notice of formation of a new company. Also, it can be called as the official record describing the terms and conditions of offer of capital issues to investors. In the case Nash v. Lynde, (1929) A. C. 158, it was held that if the document satisfies the condition of invitation to the public, it is a prospectus even though it is issued to a defined class of the people. However, if the invitation is made to a small circle of friends of the directors or
family members or to existing shareholders, it is not an offer to the general public.


Prospectus, acts like a window through which an investor can take a look into the significance of the company’s venture. The investor must therefore be given a complete picture of the company’s future activities and its current position. This is done through prospectus. So, one must not write any false information about the company. Everything written should be free from any information that misleads the public.

In the case, New Brunswick & Canada Rly. & Land Co. V. Muggeridge, (1860) 1 Dr. And
Sm.363, V.C. Kindersley laid down the Golden Rule as to framing of prospectus. The following
is the Golden Rule of making prospectus:
“Those who issue prospectus holding out to public the great advantages which will accrue to persons who will take shares in a proposed undertaking, and inviting them to take shares on the faith of the representations therein contained, are bound to state everything with strict and scrupulous accuracy and not only abstain stating as fact that which is not so, but to omit no one
fact within their knowledge, the existence of which might in any degree affect the nature or extent and quality of the privileges and advantages which the prospectus holds as inducement to take shares.”
Section 26 of the Companies Act, 2013 explains what all things is to be included while making a
Now let’s move on to our main topic, Shelf Prospectus.

Shelf Prospectus means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.
Section 60 (A) of the Companies Act, 1956, only allows public financial institutions, public sector banks and scheduled banks could use Shelf Prospectus. Provided that, their main objective was ‘financing’. Section 60 (A) of the 1956 Act allowed SEBI to administer the provision in relation to listed companies and those which intended to get listed. Other companies were administered by Central Government. SEBI was also authorized to inspect books of account and other books and papers with respect to listed companies and the companies which intended to get listed by the Companies Act, 2000. It also had the power to file complaints under section 621 of 1956 Act for offences relating to issue and transfer of securities and non-payment of dividend.
The concept of Shelf prospectus has been enlarged by the Companies Act 2013. Section 31 (1) says that “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
This act has minimized the long procedures and rules which has to be followed while raising
finances from the public. According to section 31, earlier the concept of shelf prospectus was
restricted to issue of securities by financial institutions, public sector banks or those institutions
whose main objective was financing.
Securities and Exchange Board of India (SEBI) has to provide regulations for any class or
classes of companies which may file a shelf prospectus with Registrar at the stage of first offer of
securities. The validity of the prospectus should not exceed more than a year.
Section 31 of the 2013 act enables multiple issuances of securities within a year. In simple words
we can say that, section 31 of 2013 Act, would enable a company to issue securities or any
person offering securities for sale, to make multiple public offers within the specified lifetime of
one year. If any subsequent offer of such securities is issued during this period, no further
prospectus is required.

 No regulatory actions should be pending against the promoters or the directors of the
 5000 crores and above must be the valuation of the company.
 An agreement for the dematerialization of securities should be submitted to SEBI.
 It must be ensured that the bonds issued by the company has a rating of AA- or above.
 In repaying the installments of debts, the company must be consistent.

Section 31 (2),
Sub section 2 of section 31 of 2013 Companies Act, says to file an Information Memorandum by the company’s filing Shelf Prospectus. This is to make a public disclosure of changes that may have occurred, so that at the time of subsequent public offer the shelf prospectus would be updated. These changes are related to all the material facts relating to new changes created,
changes in the financial position of the company occurred since first offer of securities or between the preceding offer. Other things are also specified.
Proviso of 31 (2)
It says that if changes have been taken place between the issuance of information memorandum and allotment of securities, the subscribers should be given a chance to review their decision to subscribe by bringing the changes to their notice. If the subscribers are willing to withdraw the fund subscribed by them, it should be refunded within 15 days.


Section 31(3)
Says that every information memorandum to be deemed as a prospectus to be integrally read with the shelf prospectus as if it were to form part and parcel of one single composite prospectus.

The section 31 of the Companies Act concludes with an explanation of shelf prospectus it goes like this: “means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus”. Shelf prospectus is can be called as the record book of a company, as it
gives the whole background, current plans and decide what next of the company. The company buys the shares or debentures through reading and then deciding whether to purchase or not.


  1. Elements of Company law, N.D. Kapoor
  2. Company law, Avatar Singh
  3. Company law, N.C. Jain
  4. Company law, A. Ramaiya

Aishwarya Says:

Law students often face problems, which they cannot share with their friends and families. We have started a column on our website Student’s Corner. In this column we are talking to several law students about the challenges that they face. Students who are interested in participating in the same, can fill this Google Form.


We do conduct several Courses, Quizs and Webinars, Click here to registerDo 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 the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories

Join our Whatsapp group for Legal Job Openings

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 )

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.

Create a website or blog at

Up ↑

%d bloggers like this: