PROSPECTUS

ISSUE OF SECURITIES BY COMPANIES (SECTION 23):

A company can issue capital by issuing securities. The term securities

here has same meaning as given in clause (h) of section 2 of the
Securities Contract Regulation Act, 1956 (SCRA).
There are separate legal methods for public and private companies for
issuing securities.
Issue of Securities by Private Company:
A private Company may issue its securities:
      i.        By way of right or bonus issue; or
     ii.        Through private placement.
Issue of Securities by Public Company:
A Public company may issue securities:
      i.        To public through prospectus i.e. “Public Offer”;
     ii.        Through private placement;
    iii.        Through right or bonus issue.

PROSPECTUS
Clause (70) of Section 2 of this Bill define “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 a body corporate.

Declaration of Compliance:
Every prospectus shall make a declaration about the compliance of the
provisions of this Act and a statement to the effect that nothing in the
prospectus is contrary to the provisions of this Act, the Securities
Contracts (Regulation) Act, 1956 and the Securities and Exchange
Board of India Act, 1992 and the rules and regulations made there
under.

Other matters in Prospectus:

Clause (d) of Sub – section (1) of section 26 give unlimited power to
central government to list other matters and set out other reports to be
included in a prospectus.

Delivery of Prospectus with Registrar:

A copy of prospectus shall be delivered to the Registrar for registration
signed by every person who is named as a director or proposed
director of the company or by his duly authorised attorney on or before
the date of its publication and only then it shall be issued by or on
behalf of a company or in relation to an intended company.
SHELF PROSPECTUS (SECTION 31):

Any class of company may file a shelf prospectus with the Registrar of Companies at
the stage of first offer of securities.

“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.

The shelf prospectus shall indicate that validate period of the shelf prospectus is a
period not exceeding one year from the date of first offer of securities under that
prospectus. Once, a shelf prospectus has been issued, there will be no requirement of
any further prospectus for any subsequent offer of these securities issued during this
validity period.

For any subsequent issue, company shall file an “Information Memorandum”. This
information memorandum shall contain all material facts relating to (i) new charges
created; and (ii) changes in financial position of the company from first/previous
offer to this second/subsequent offer under this Shelf Prospectus.

It may be possible that a company or any other person has received an application
and advance payment of subscription before any material changes like new charges
or financial position. In these cases, the company or that other person shall intimate
these changes to the applicants. If they express a desire to withdraw their
application, the company or other person shall refund all the money received as
share application money for subscription within fifteen days.

When an offer of securities is made on shelf prospectus, the information

memorandum together with shelf prospectus shall be deemed to be a prospectus.

RED HERRING PROSPECTUS (SECTION 32):

A company may issue a red herring prospectus before the issue of a prospectus.

“Red herring prospectus” means a prospectus which does not include complete
particulars of the quantum or price of the securities included therein.

The company shall file red herring prospectus with Registrar of companies at least
three days before the opening of the subscription list and the offer.

A red herring prospectus shall carry the same obligation as are applicable to a
prospectus. In case there is any variation between red herring prospectus and a
prospectus shall be highlighted as variation in the prospectus.
Upon the closing of the offer of securities, the prospectus shall be filed with the
Registrar and the Securities and Exchange Board of India. This prospectus shall state
(a) total capital raised, (b) whether debt capital or share capital, (c) closing price of
the securities and (d) any other details not included in red herring prospectus.