Prospectus, Statement in lieu of Prospectus

Prospectus, Statement in lieu of Prospectus: The requirements for the advertising of the prospectus are found in Section 30 of the Companies Act 2013. This section states that when a prospectus is advertised in any way, the contents of the company’s memorandum regarding the object, members’ liabilities, the amount of the company’s share capital, signatories and the number of shares subscribed by them, and the company’s capital structure must be specified. The following are the different types of prospectuses:

• Prospectus Red Herring
• Prospectus for the Shelf
• Prospectus abbreviated
• Considered a Prospectus

Prospectus, Statement in lieu of Prospectus

• Prospectus for the Shelf

A shelf prospectus is a prospectus published by a public financial institution, corporation, or bank for one or more issues of securities or classes of securities described in the prospectus. When a shelf prospectus is produced, the issuer is relieved of the requirement to issue a separate prospectus for each offering; instead, he may offer or sell securities without having to publish a new prospectus.

Section 31 of the Companies Act of 2013 has been used to address the provisions relating to shelf prospectuses.

The Shares and Exchange Board of India will issue rules for any class or classes of firms that may submit a shelf prospectus with the registrar during the initial sale of securities.

The validity duration of the prospectus must be specified in the prospectus, and it should not exceed one year. This period begins on the first day of the securities’ initial offering. There is no need for a new prospectus for a second or subsequent offer.

A corporation must also submit an information memorandum with a shelf prospectus.

• Prospectus for red herrings

The term “red herring prospectus” refers to a prospectus that lacks comprehensive details on the amount of the shares’ price. When a firm is planning to make a public offering of securities, it may release a red herring prospectus beforehand.

At least three days before the subscription list or offer opens, this form of prospectus must be submitted with the registrar. A red herring prospectus has the same duties as a prospectus. If there is a difference between a red herring prospectus and a prospectus, it should be noted as such in the prospectus.

When the securities offering concludes, the prospectus must specify the entire capital raised, whether via debt or share capital. It must also provide the securities’ closing price. Any additional information not provided in the prospectus must be filed with the registrar and SEBI.

Under Section 60B(7), the applicant or subscriber has the right to withdraw the application within 7 days after receiving notice of amendment, and the withdrawal must be conveyed in writing.

• Prospectus in Condensed Form

The abridged prospectus is a condensed version of a prospectus that has been filed with the registrar. It has all of the characteristics of a prospectus. An abbreviated prospectus condenses all of the material in the prospectus so that an investor may get all of the important information in a short amount of time.

According to Section 33(1) of the Companies Act of 2013, every form for the acquisition of a company’s stocks must be accompanied with an abbreviated prospectus.

It provides all of the necessary and realistic information for the investor to make an informed choice, and it also minimises the expense of a public capital offering since it is a condensed version of a prospectus.

• Considered a Prospectus

Under section 25(1) of the Companies Act, 2013, a considered prospectus has been declared.

When a corporation offers securities for sale to the public, allots or agrees to allot securities, the document is termed a prospectus via which the offer is made for sale to the public. For all purposes, the document is assumed to be a corporate prospectus, and all of the content and obligations of a prospectus will be applied to it.

The court concluded in SEBI v. Kunnamkulam Paper Mills Ltd. that if a rights issue is given to current members with the right to renounce in favour of others, it becomes a considered prospectus if the number of such others reaches fifty.

When a firm does not submit a prospectus to the public in order to invite them to subscribe for shares, a Statement in Lieu of Prospectus is filed with the Registrar of Companies (ROC). The statement must be signed by all of the directors or their authorised representatives in writing. It’s comparable to a prospectus, except it’s just a few pages long. If the business does not issue prospectus or if the company does issue prospectus but has not proceeded with the allocation of shares because the minimum subscription has not been reached, a Statement in Lieu of Prospectus must be submitted with the registrar.