Meaning of ProspectusIn common parlance prospectus refer to an information or and booklet or provide document on idea which an business investor invests with in the securities of an issuer companies. It has been defined under section 2(70) so on mean any document described or issued as a prospectus and includes a red herring prospectus mentioned in section 32 or shelf prospectus mentioned in section 31 or any notice, circular, advertisement or other document inviting offers from the general public for the subscription or purchase of any securities of a body corporate.
Matters to be stated in ProspectusEvery prospectus issued by or on behalf of a public company either with regard to its formation or subsequently, or by or on behalf of a person who is or has been engaged or curious about the formation of a public company, shall be dated and signed and shall state such information and began such reports on financial information as could also be specified by the Securities and Exchange Board in consultation with the Central Government:
(c) make a declaration about the compliance of the provisions of this Act and a press release to the effect that nothing within the prospectus is contrary to the provisions of this Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and therefore the Securities and Exchange Board of India Act, 1992 (15 of 1992) and therefore the rules and regulations made thereunder; and
(2) Nothing in sub-section (1) shall apply—
(a) to the difficulty to existing members or debenture-holders of a corporation , of a prospectus or sort of application concerning shares in or debentures of the corporate , whether an applicant features a right to renounce the shares or not under sub-clause (ii) of clause (a) of sub-section (1) of section 62 in favour of the other person; or
(1) Where at any time, a corporation having a share capital proposes to extend its subscribed capital by the difficulty of further shares, such shares shall be offered—
(a) to persons who, at date offer that to holders of an equity shares in the proportion, as nearly the circumstance admit, to be paid-up share capital on those shares by sending a letter of offer subject to the subsequent conditions, namely:—
- (i) the offer shall be made by notice specifying the amount of shares offered and limiting a time not being but fifteen days and not exceeding thirty days from the date of the offer within which the offer, if not accepted, shall be deemed to possess been declined;
- (ii) unless articles of corporate other wise provide,offer aforesaid shall deemed to incorporate right exercisable by person concerned to renounce shares offered him or any of them in favour of the other person; and therefore the notice mentioned in clause (i) shall contain a press release of this right
- (iii) after the expiry of the time laid out in the notice aforesaid, or on receipt of earlier intimation from the person to whom such notice is as long as he declines to accept the shares offered, the Board of Directors may eliminate them in such manner which isn't dis-advantageous to the shareholders and therefore the company;
(b) to employees under a scheme of employees’ option , subject to 2&5[special resolution] gone by company and subject to such conditions as could also be prescribed; or
(c) to any persons, if it's authorised by a special resolution, whether or not those persons include the persons mentioned in clause (a) or clause (b), either for cash or for a consideration aside from cash, if the worth of such shares is decided by the valuation report 6[of a registered valuer, subject to the compliance with the applicable provisions of Chapter III and the other conditions as could also be prescribed]
(2) The notice that has been mentioned in the sub-clause (i) of clause (a) and of sub-section (1) shall dispatched through registered mail or a speed post or through the electronic mode or courier or any other mode having proof of delivery to all or any the prevailing shareholders a minimum of three days before the opening of the difficulty .
(3) Nothing during this section shall apply to the rise of the subscribed capital of a corporation caused by the exercise of an option as a term attached to the debentures issued or loan raised by the corporate to convert such debentures or loans into shares within the company:
Provided that the terms of issue of such debentures or loan containing such an option are approved before the difficulty of such debentures or the raising of loan by a special resolution gone by the corporate generally meeting.
(4) Not with standing anything contained in the sub-section (3), where any debentures which are issued, or the loan has been obtained from any of Government by corporation , and if Government considers that is it necessary within the public interest so to try to to , it may, by order,
Direct that such debentures or loans or any part thereof shall be converted into shares within the company on such terms and conditions as appear to the govt to be reasonable within the circumstances of the case albeit terms of the difficulty of such debentures or the raising of such loans don't include a term for providing for an option for such conversion:
Provided that where the terms and conditions of such conversion aren't acceptable to the corporate , it may, within sixty days from the date of communication of such order, appeal to the Tribunal which shall after hearing the corporate and therefore the Government pass such order because it deems fit.
(5) In determining the terms and conditions of conversion under sub-section (4), the govt shall have due reference to the financial position of the corporate , the terms of issue of debentures or loans, because the case could also be , the speed of interest payable on such debentures or loans and such other matters because it may consider necessary.
(6) Where govt has, by order made under sub-section (4), directed that, the any debenture, loan or any part there of shall converted in shares during the company and where no appeal has been made or preferred to the Tribunal under sub-section (4) or where such appeal has been dismissed,
the memorandum of any such company shall be, where order has effect of accelerating the authorised share capital of the corporate , stand altered and therefore the authorised share capital of such company shall stand increased by an amount adequate to the quantity of the worth of shares which such debentures or loans or part thereof has been converted into.
Note: Sub section (4),or (5) and (6) has notified as on date 01/06/2016.
(3) Subject to sub-section (2), the provisions of sub-section (1) shall apply to a prospectus or a sort of application, whether issued on or with regard to the formation of a corporation or subsequently.
The date indicated within the prospectus shall be deemed to be the date of its publication.
(4) No prospectus shall be issued by or on behalf of a corporation or in reference to an intended company unless on or before the date of its publication, there has been delivered to the Registrar for registration, a replica thereof signed by every one who is known as therein as a director or proposed director of the corporate or by his duly authorised attorney.
(5) A prospectus issued under sub-section (1) shall not include a press release purporting to be made by an expert unless the expert may be a one that isn't , and has not been, engaged or curious about the formation or promotion or management, of the corporate and has given his written consent to the difficulty of the prospectus and has not withdrawn such consent before the delivery of a replica of the prospectus to the Registrar for registration and a press release thereto effect shall be included within the prospectus.
(6) Every prospectus which is issued under the sub-section (1) shall, on be the face of it,
(a) state that a replica has been delivered for registration to the Registrar as needed under sub-section (4); and
(7) The Registrar shall not register a prospectus unless the wants of this section with reference to its registration are complied with and therefore the prospectus is amid the consent in writing of all the persons named within the prospectus.
(8) No prospectus shall be valid if it's issued quite ninety days after the date on which a replica thereof is delivered to the Registrar under sub-section (4).
(9) If a prospectus is issued in contravention of the provisions of this section, the corporate shall be punishable with fine which shall not be but fifty thousand rupees but which can reach three lakh rupees and each one that is knowingly a celebration to the difficulty of such prospectus shall be punishable with imprisonment for a term which can reach three years or with fine which shall not be but fifty thousand rupees but which can reach three lakh rupees, or with both.