PROSPECTUS

Companies Act,2013

Presented by:
Deependra Bharati-M2325059
Tushar Chavan- M2325064
Pratik Gadhe- M2325072
Swapnil Kancahalwad-M2325079
Sandeep Kaniojiya- M2325080
Atharv Sonje- M2325106
 Introduction
Table of Index
 Types
 Contents
 Objects
 Penalty for non-registration
 Issuance and its objects
 Consequences of false and misleading statement in prospectus
Prospectus: Introduction

Section 2(70)-“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.
According to the companies act 2013, there are four types of the prospectus, abridged
prospectus, deemed prospectus, red herring prospectus, and shelf prospectus.
Whenever the company issues the prospectus, the company must file it with the
regulator. The prospectus includes the details of the company’s business, financial
statements.
1.To notify the public of the issue
2.To put the company on record with regards to the terms of the issue and allotment
process
3.To establish accountability on the part of the directors and promoters of the company
.
Deemed Prospectus – Deemed
prospectus has mentioned Red Herring Prospectus – As per
under Companies Act, 2013 Companies Act,2013 under
Section 25 (1). When a Section 32 Red herring
company allows or agrees to prospectus does not contain all
allot any securities of the information about the prices of
company, the document is securities offered and the
.
considered as a deemed number of securities to be
prospectus via which the offer issued. According to the act, the
is made to investors. Any firm should issue this
document which offers the sale prospectus to the registrar at
of securities to the public is least three before the opening
deemed to be a prospectus by of the offer and subscription list.
implication of law.
Shelf prospectus – Shelf prospectus
is stated under section 31 of the Abridged Prospectus –Section
Companies Act, 2013. Shelf 33 Abridged prospectus is a
prospectus is issued when a company memorandum, containing all
or any public financial institution salient features of the
offers one or more securities to the prospectus as specified by SEBI.
public. A company shall provide a This type of prospectus includes
validity period of the prospectus, all the information in brief,
which should not be more than one which gives a summary to the
year. The validity period starts with
investor to make further
the commencement of the first offer.
decisions. A company cannot
There is no need for a prospectus on
further offers. The organization must issue an application form for
provide an information memorandum the purchase of securities
when filing the shelf prospectus. unless an abridged prospectus
accompanies such a form.
Section 26 and Rule 3 of Companies Act, 2013 every Prospectus shall be Dated and Signed and shall

Proposed Timeline
contain the following matters
 INFORMATION/Matters in Prospectus

Proposed Timeline
☛Name and Addresses of Register office, CS, CFO, Auditors, Legal Advisor, Bankers and
such other persons
☛Dates of Opening and closing of the issue
☛A Statement of Board of directors about the separate bank account where all money
received out of issue to be transferred
☛Details about Underwriting of issue
☛Consent of directors , Auditors, Legal Advisors, Bankers
☛Details of directors including remuneration
A
☛Authority of the issue and Details of Resolution passed
☛Prociedure and Time, schedule for allotment & issue of securities
☛Capital Structure of the Company
☛Main object of Public offer
 Reports of Prospectus
Proposed Timeline
☛REPORTS BY AUDITORS:- Profit and loss, Assets, Liabilities
☛Reports relating profit and losses for each of the 5 Financial years immediately preceding
the financial year
☛Reports about the business or transactions:- Proceedings of securities

DECLARATION
Statement that nothing in the prospectus is contrary to the provision of
A1. Companies act 2013
2. SECURITIES CONTRACT (REGULATIONS) ACT,1956
3. SECURITIES &EXCHANGE BOARD OF INDIA ACT,1992

Other Matters and Disclosures

Case Laws

Taksheel solution limited, [2013] 26

Taksheel Solution Ltd was incorporated in 1999, it is an IT Solution Company engaged in the
business of providing services and products to the Information Technology & Telecom, and
financial services industry. 27 It was found by SEBI that Taksheel Solutions ltd. had hidden vital
information about the Red Herring Prospectus as there were vital pieces of important
information missing. It was found that various misstatements were made by Taksheel in their
Red Herring Prospectus, which failed to disclose the vital facts to the public. Untrue statements
and inaccurate data in electronic media were also found in the shares of the company on its
opening day of subscription. SEBI, the Securities and Exchange Board of India, put restrictions
on the promoters, and directors from trading in the markets. Board also declared that it is the
duty of the company to make a full entry in the prospectus about the details of the company
and relevant information asked in section 26 of the company law act.
 Registration of prospectus
Section 42.

1.A prospectus shall not be issued, circulated or distributed by any person unless a copy thereof
has first been registered by the Registrar.
2.The Registrar shall not register a copy of any prospectus if it contains any statement or matter
which is in his opinion misleading in the form and context in which it is included and unless—
a)the copy signed by every director and by every person who is named therein as a proposed
director of the corporation or by his agent authorized in writing is lodged with the Registrar on
or before the date of its issue;
b)the prospectus appears to comply with the requirements of this Act; and
c) there are also lodged with the Registrar copies verified as prescribed of any consents
required by section 45 to the issue of the prospectus.
3.If a prospectus is issued without a copy thereof having been so registered the corporation and
every person who is knowingly a party to the issue of the prospectus shall be guilty of an
offence against this Act.

Penalty: Imprisonment for five years or one hundred thousand ringgit or both.
 Issuance

Section 23 of the Companies Act, 2013 mentions Public issue as a way of raising funds through the
public. It means the selling or marketing of share for subscription by the public by issue of
prospectus. The importance of the public offer is by issuing share to public and getting listed to
recognized stock exchanges in India.

Objectives of issuance:

1.To bring to the notice of the public that a new company has been formed.
2.To preserve the authentic record of the terms and allotment on which the public have been invited
to buy shares or debentures of the company.
3.To secure that the directors of the company accept responsibility for the statements in the
prospectus.
 Misstatements in the prospectus
CONSULTATION
Pricing Presentations are communication tools
Since prospectus is relied on by the members of the public to subscribe or purchase the
that can be used as lectures.
securities of a company, any misstatements on it invite penal consequences. Misstatement
may occur when a statement which is untrue or misleading in form or context is included in
the prospectus. Also, any inclusion or omission of any matter which is likely to mislead will
PROJECT
also be considered as a misstatement (sec. 34). For e.g., a statement on theIMPLEMENTATION
purpose of
offering shares which is untrue, or statement on the locations of offices for a company
Presentations which tools
are communication
is misleading will amount to misstatement in the prospectus. that can be used as lectures.

POST-PROJECT
Presentations are communication tools
that can be used as lectures.
A person who has signed and given consent to the prospectus is liable for misstatement. A
misstatement in the prospectus can invoke criminal (sec. 34) and civil liabilities (sec.
35). Misstatements can lead to punishment for fraud under Sec. 447. Sec. 447 further sets out
the punishment for fraud:
Case Laws

Birla Pacific Medspa Ltd, [2020] 28

SEBI found that the misstatements were made by the company in its prospectus regarding its
objectives at its IPO. The money was raised to utilise in the setting up of Evolve Med Spacenters, the
SEBI has found that the money was not used for Medspa, instead, money was
deployed as interstate corporate deposits, and 60% of them was not returned to the company.
It was not disclosed in the prospectus that the IPO fund will be used in ICD to group companies.
SEBI declared that the interim use of funds and objects of issue were untrue on material facts
and misleading. Hence, SEBI barred the company and C prospectus signatories from accessing
the securities market and making any transactions for two years.
Conclusion:

The prospectus presents a comprehensive overview of the proposed venture,

highlighting its objectives, market potential, financial projections, and risk factors. In
conclusion, the prospectus underscores the viability and attractiveness of the investment
opportunity while providing investors with essential information to make informed
decisions. It serves as a foundational document, inviting stakeholders to participate in
the venture's success by offering a clear roadmap and potential returns.