Prospectus & Allotment of Securities under the Companies Act 2013
Chapters III
Sections 23 to41
-------------------------------------------------------------------
Sec
23: Issue of Securities by:
Public Company
Prospectus (Public
Offer)
Private
PlacementRights issue / Bonus shares
Sec
24: Power of SEBI to regulate issue and transfer of securities etc....
SEBI shall make regulation and administer
the following activities of the listed companies / those companies who are
intending to get their securities listed on the stock exchange:
a. Issue and transfer of securities
&
b. Non payment of dividend
Sec
25: Document containing offer of securities for sale is deemed to be prospectus:
When a company allots securities to the
public based on an offer that has been made, then,any document through which such
an offer is made is considered to be a prospectus and it has to fulfil all the
requirements of a prospectus.
-
Securities
to be offered for sale to the public
o Within 6 months after the
allotment or agreement to allot or
o At the date when the allotment
was made andthe whole of the consideration was received.
In order to give effect to
sec 26 the prospectus has to contain the following:
o Net amount of consideration
received or to be received and
o The time and place of inspecting
the allotments made
o The names of the persons making
the allotment
o The prospectus has to be signed
by
·
2
directors in case of directors
·
Firm
– ½ of the partners in case of firm
Sec
26: Information to be stated in the Prospectus:
-
Prospectus
to contain the objective of the offer, the main object of the company.
-
Name
and address of the registered office of the company, CFO, Auditors, legal advisors
and such other persons as may be prescribed and their consent and interest on
issue of prospectus.
-
The
date of opening and closing of the issue (time schedule for the allotment)
- A
declaration about the issue of allotment letters and refunds
- A
statement by the board of directors on the separate bank account that would be
opened to deposit the money received on application and the details of their
utilization and un-utilization.
- Details
on minimum subscription and underwriting of the shares if any
- Information
on management perception, risk factors, gestation period of the project,
deadlines for completion of the project, progress details
- Any
litigation or legal action pending during the last 5 years immediately
preceding the year of issue of prospectus.
- Financial
information for the last 5 years. If 5 years has not been completed by the
company then information till the last date before the issue of prospectus.
-
A
declaration about the compliance is to be given
- Before
issuing prospectus the same has to be registered with the ROC in the prescribed
manner. (ie.) along with the signatures and a written consent as the case may
be.
- The
prospectus is valid for a period of 90 days after the date on which a copy
thereof is delivered to the registrar.
Sec
27: Variation in terms of contract or objects in prospectus:
-
The
terms of the contract/ prospectus can be modified by
§
Holding
a general meeting and
§
Passing
a special resolution
o The modified notice to be
published in the newspapers (English and vernacular lang. in the place where
the registered office is situated).
Note: money raised through
prospectus can not be used for buying trading or dealing in equity shares of
other listed companies.
Q: Does it mean you
can use it for dealing in securities other than equity shares?
o
Exit option is to be given to the dissenting
shareholders. (SEBI regulations shall be applicable).
Sec
28: Offer of sale of shares by certain members of company
When
certain members of the company make an offer for issue of securities onbehalf
of the company to the public then such an offer is treated to be a prospectus
as allotment is being made on such offer.
Prospectus
issued in such manner to contain all the information as required under law.
Sec
29: Public offer of securities to be in DEMAT form:
-
Every company making public offer and
-
The promoter of every public company making a
public offer of any securities to hold such securities in dematerialised form
only.
-
Such other class of companies as may be
prescribed.
Sec
30: Advertisement of prospectus:
-
Every company making public offer and
-
The promoter of every public company making a
public offer of any securities to hold such securities in dematerialised form
only.
-
Such other class of companies as may be
prescribed.
Sec
31: Shelf Prospectus:
-
Shelf prospectus along with the Information
Memorandum is to be filed with the registrar at the stage of the first offer of
securities
-
It shall be valid for a period of 1 year from
the date of first offer
-
No further prospectus is required to be
issued if further offer is made during the validity period.
Sec
32: Red Herring prospectus (RHP):
- Red herring prospectus may be issued prior to
the issue of prospectus.
- RHP shall be filed with the Registrar atleast
3 days prior to the opening of the subscription list and the offer
-
In case of any variations in the RHP and the
prospectus the same shall be highlighted.
- On the closure of the offer the prospectus
stating the details of the capital raised, closing price, and other information
that was not available on the RHP shall be filed with the Registrar and SEBI.
Sec
33: Issue of application forms for securities:
The
application form for purchase of securities shall be accompanied by an abridged
prospectus containing the salient features of the Memorandum.
However it
is not required if the application was issued:
o To
enter into an underwriting agreement or
o In
relation to those securities that were not offered to the public
Sec
34, 35 and 36: Criminal& civil liability on the company:
Every
person making the offer shall be liable in case any un-true or misleading
statements are given in the prospectus
If any
person has sustained any loss or damage due to any untrue or misleading
statements, then the company and every officer in default shall be liable to
pay compensation as the case may be.
However,
if the concerned personproves that he is not guilty then he shall not be
liable.
-
Fraudulently inducing persons to invest
money.
Sec
38: punishment to such persons who acquires or makes an application to acquire
shares illegally:
-
Any person who:
o Makes
an application to the company in a fictitious name
o Makes
multiple applications in different names
o Directly
or indirectly induces the company to allot securities in fictitious names
Punishment:
Shall be
punishable by the court and the court may order disgorgement of gain, if any
and to seizure and disposal of the securities in his possession.
Such
recovered fund shall be transferred to Investor Education and Protection Fund.
Sec
39: Allotment of Securities of Company:
-
The company shall allot securities on
obtaining the minimum subscription amount statement in the prospectus or 5% of
the nominal amount of the securities or such other sum as may be prescribed by
SEBI.
-
The return of allotment shall be filed with
the ROC on allotment.
- If the minimum subscription amount is not
received within 30 days from the date of issue of prospectus or such other date
then the amount received shall be refunded.
Sec
40: Securities to be dealt with stock Exchanges:
-
-
The prospectus to contain the details of the
stock exchange where the securities are going to be listed.
- The amount received on application shall be
deposited in a separate bank account and shall be used
o for
adjusting against the allotment of securities or
o for
repayment of money to the applicants
Sec
41: Global Depository Receipt:
-
A company canissue GDR in any foreign country
after fulfilling the following criteria.
o Hold
General meeting &
o Pass
Special Resolution
