Company Law

PROSPECTUS: ISSUES, CONTENTS AND KINDS UNDER COMPANIES ACT, 2013
In general parlance prospectus refers to an information booklet or offer document on the basis of which an
investor invest in the securities of an issuer company. It has been define under section 2(70) so as to mean
any document describe or issued as prospectus and includes a red herring p
rospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers
from the public for the subscription or any purchase of any securities of body corporate.
PROSPECTUS CONCEPT
 Any kinds of notice , circular, document, advertisement though which the company appeals
investment fom public company
 For purpose or subscription o any securities of the company
 Public company to raise fund from the public issue a document called prospectus
 Prospectus is for public company only not only for private companies
 Prospectus should be filed with SEBI and get approval before issuing.
 TYPES OF PROSPECTUS
 Matters to be stated in the prospectus

According to Section 26(1),every Prospectus shall state such information and set out such reports on
financial information as may be specified by the Securities and Exchange Board in consultation with the
Central Government: Provided that until the Securities and Exchange Board specifies the information and
reports on financial information under this sub-section, the regulations made by the Securities and Exchange
Board under the Securities and Exchange Board of India Act, 1992, in respect of such financial information
or reports on financial information shall apply.
 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. In simple terms Shelf Prospectus is a single prospectus for multiple public. Issuer is permitted to
offer and sell securities to the public without a separate prospectus for each act of offering for a certain
period.
Under the Act any class or classes of companies, as the Securities and Exchange Board (SEBI) may provide
by regulations in this behalf, may file a shelf prospectus with the Registrar. Such prospectus is to be
submitted at the stage of the first offer of securities which shall indicate a period not exceeding one year as
the period of validity of such prospectus. The validity period 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 required
1
https://www.icsi.edu
(THE INSTITUTE OF COMPANY SECRETARIES OF INDIA)
 RED HERRING PROSPECTUS
Red herring Prospectus means a prospectus which does not include complete particulars of the quantum or
price of the securities included therein. In simple terms a red herring prospectus contains most of the
information pertaining to the company’s operations and prospects, but does not include key details of the
issue such as its price and the number of shares offered. According to section 32 a company proposing to
make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus. Such
company proposing to issue a red herring prospectus shall file it with the Registrar at least three days prior
to the opening of the subscription list and the offer.
 ABRIDGED PROSPECTUS
According to section 2(1) of the Act “abridged prospectus” means a memorandum containing such salient
features of a prospectus as may be specified by the Securities and Exchange Board by making regulations in
this behalf. Section 33 of the Act provides that no form of application for the purchase of any of the
securities of a company shall be issued unless such form is accompanied by an abridged prospectus. A copy
of the prospectus shall, on a request being made by any person before the closing of the subscription list and
the offer, be furnished to him.
 OFFER FOR SALE -DEEMED PROSPECTUS

Public Offer includes or an offer for sale (OFS) of securities to the public by an existing shareholder,
through issue of a prospectus.
Under section 25 of the Act where a company allots or agrees to allot any securities of the company with a
view to all or any of those securities being offered for sale to the public, any document by which the offer
for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company. In
simple terms any document by which the offer or sale of shares or debentures to public is made shall for all
purposes be treated as prospectus.
The document “Offer for sale” is an invitation to the general public to purchase the shares of a company
through an intermediary, such as an issuing house or a merchant bank. A company may allot or agree to allot
any shares or debentures to an “Issue house” without there being any intention on the part of the company to
make shares or debentures available directly to the public through issue of prospectus. The issue house in
turn makes an “Offer for sale” to the public.
CASE LAW
Pramatha Nath Sanyal Vs Kali Kumar Dutt
 Company issue an advertising in a news paper which states

 Some share are still available for sale according to the terms of prospectus of the company which can
be obtained on application
 The company had launched prospectus also
 Case was filled saying this is just at advertising in the news paper it is not prospectus
2
 Court held :- Newspaper ad can be treated as prospectus
 CONTENTS OF A COMPANY PROSPECTUS
1. Name of the CompanyRegistered Address of Company

2. Objects of the Company
3. Purpose of the issue
4. Nature of Business
5. Capital structure of Company
6. Name and address of Signatories and no of shares subscribed by them
7. Qualification shares of the Directors
8. Particulars of Debentures and redeemable preference shares
9. Remuneration of Directors and Promoters
10. Minimum Subscription for allotment
11. Date of opening and closing of issue
12. Details of Underwriter
13. Underwriting Commission and Brokerage
14. Name and address of Auditor, Company Secretary, Banker and Trustee of Company
15. Particulars of material documents
16. Expected rate of dividend and voting rights
ISSUE OF PROSPECTUS: (Companies Act, 2013)
The issue of the prospectus is defined under section 26 of Companies Act, 2013:
 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.
 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/-.
CONCLUSION:
For a public company, the prospectus is one of the important booklets which explains about the company in
a comprehensive manner about its shares and debentures, whereas it is not mandatory for the private
company to issue the prospectus. One of the important requirements of the prospectus is that it must have to
be registered, in case not registered it is not valid and may lead to penal actions that are enshrined under
Companies Act, 2013. Prospectus plays a prominent role in any public company for its development.
2
https://mmhapu.ac.in
(Maulana Mazharul Haque Arabic And Persion University,Patna.)

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PROSPECTUS: ISSUES, CONTENTS AND KINDS UNDER COMPANIES ACT, 2013

 Matters to be stated in the prospectus

 OFFER FOR SALE -DEEMED PROSPECTUS

 Company issue an advertising in a news paper which states

 Court held :- Newspaper ad can be treated as prospectus

 CONTENTS OF A COMPANY PROSPECTUS

1. Name of the CompanyRegistered Address of Company

ISSUE OF PROSPECTUS: (Companies Act, 2013)

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