Prospectus in Company Law: Section 30 of the Companies Act 2013
Updated: Jun 3, 2022
Advertisement Of Prospectus –
"Where an advertisement of any of a company is published in any manner, it shall be necessary to specify therein the content of its memorandum as regards the objects, the liability of members and the amount of share capital of the company, and the names of the signatories to the memorandum and the number of shares subscribed for by them, and its capital structure," says section 30 of the Companies Act 2013.
The Companies Act, 2013 was enacted by the parliament on August 29, 2013, gained the president's assent on August 30, 2013, and was published in the Official Gazette on August 30, 2013. The Act consolidates and modifies the law governing corporations.
The provisions of this Act shall apply to companies incorporated under this Act or any previous company law, insurance companies (except those that are subject to the provisions of the Insurance Act, 1938 or the Insurance Regulatory and Development Authority Act, 1999), banking companies, companies engaged in the generation or supply of electricity, any other companies governed by special Act, any other body corporate incorporated by any act for the time being in force, and any other companies governed by special Act. provide in this behalf by notification, subject to such exceptions, modification, or adaptation as may be indicated in the notification.
The prospectus is a regulation document released by a public company encouraging investors and the general public to subscribe to its securities. It is required by and filed with the Securities and Exchange Commission, and it also assists in informing investors about the danger of investing. It is only required to be issued after the company's establishment and represents the company's stocks, bonds, and other types of instruments. To protect investors from the risk of investing in a failing firm, the prospectus should be accompanied by the company's performance history and financial facts.
Prospectus –
A prospectus is defined as "any document issued for advertisement or other document requesting offers from the public for the subscription or acquisition of any securities of a body corporate" under Section 2(70) of the Companies Act 2013.A prospectus is an invitation to the public to purchase or subscribe to the company's shares or debentures. In other words, any advertisement for the company's shares or debentures. A prospectus is not allowed for private limited corporations, and they cannot ask the public to subscribe to their shares. Only public limited companies are allowed to issue prospectuses. Making it an open invitation extended to the whole public.
According to section 26(1)(a) of the Companies Act, 2013, the prospectus must provide the following information:
Company's name and registered office.
The main objective of the company.
The main objective of the public offers.
Remuneration of the directors.
Details of the directors, Managing directors, Secretaries, Treasurer, and Managers.
Company’s particulars of the property.
Company’s capital structure.
Preliminary expenses amount.
Amount of expenses of the issue.
Contact’s details related to the company.
Time and venue where the contract may be inspected.
Details of the auditors and bankers of the company.
Details of directors including their appointment and remuneration.
Details about the underwriting of the issues.
Particulars of reserve and reserves capitalized.
Time of opening and closing of the subscription list.
Statement of the separate bank account by the board of directors
A public company is one that issues shares and has a paid-up share capital of at least five lakh rupees, or a larger paid-up capital. In addition, a public firm can issue a prospectus on the stock exchange. A private company, on the other hand, is a corporation that cannot issue shares to the public but can issue shares to individuals and has a minimum paid-up share capital of rupees one lakh or such higher paid-up share capital as may be prescribed and is prohibited from inviting the public to subscribe for securities. If it is transformed into a public corporation, the prospectus can only be issued in public.
Types of Prospectus –
Red herring prospectus - The term "red herring prospectus" refers to a prospectus that lacks complete details about the amount of the shares' price. When a firm is planning to make a public offering of securities, it may issue a red herring prospectus first as specified under Article 31 of the Companies Act. At least three days before the subscription list or offer opens, this form of the prospectus must be filed with the registrar. A red herring prospectus has the same obligations 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. The applicant or subscriber has the right under Section60B(7) to withdraw the application on any intimation of variation within 7 days of such intimation and the withdrawal should be communicated in writing.
Shelf prospectus - Shelf prospectus is a prospectus that has been issued by a public financial institution, firm, or bank for one or more issues of securities or classes of securities that are mentioned in the prospectus. When a shelf prospectus is issued, the issuer is relieved of the need to issue a separate prospectus for each offering; instead, he can offer or sell securities without having to issue a new prospectus. Section 31 of the Companies Act of 2013 has been used to address the provisions relating to shelf prospectuses.
It should be filed with the registrar within three months before the issue of the second or subsequent offer made under the shelf prospectus as given under Rule 4CCA of section 60A(3) under the Companies (Central Government’s) General Rules and Forms, 1956.
Abridged Prospectus - The abridged prospectus is a summary of a prospectus filed before the registrar. It contains all the features of a prospectus. An abridged prospectus contains all the information of the prospectus in brief so that it should be convenient and quick for an investor to know all the useful information in short. Section33(1) of the