Law and You > Corporate Laws > Companies Act, 2013 > Contents of Prospectus

In this article, we shall discuss the requirements and contents of prospectus Under the Companies Act, 2013.

Requirements Under Section 26 (1)(a)

• The prospectus should be dated and signed. Every prospectus issued by or on behalf of a company must be dated and that date shall unless the contrary is proved, be regarded as the date of its publication and the copy of the prospectus shall be signed by every director or proposed director or by his agent must be delivered to the registrar on or before the date of publication;

Prospectus should contain

• the names and addresses of the registered office of the company, company secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other persons as may be prescribed;
• the dates of the opening and closing of the issue, and declaration about the issue of allotment letters and refunds within the prescribed time;
• a statement by the Board of Directors about the separate bank account where all monies received out of the issue are to be transferred and disclosure of details of all monies including utilized and unutilized monies out of the previous issue in the prescribed manner;
• details about the underwriting of the issue;
• consent of the directors, auditors, trustees, advocates, merchant bankers, registrar, lenders to the issue, expert’s opinion, if any, and of such other persons, as may be prescribed;
• the authority for the issue and the details of the resolution passed therefor;
• the procedure and time schedule for allotment and issue of securities;
• the capital structure of the company in the prescribed manner;
• the main objects of the public offer, terms of the present issue and such other particulars as may be prescribed;
• main objects and present business of the company and its location and schedule of implementation of the project;
• main objects of the public offer, terms of the present issue, the purpose for requirements of funds, funding plan, the summary of the project appraisal report and such other particulars as may be prescribed;
• particulars relating to—

1. management perception of risk factors specific to the project;
2. gestation period of the project;
3. extent of progress made in the project;
4. deadlines for completion of the project; and
5. any litigation or legal action pending or taken by a Government Department or a statutory body during the last five years immediately preceding the year of the issue of prospectus against the promoter of the company;

• minimum subscription, amount payable by way of premium, issue of shares otherwise than on cash;
• details of directors including their appointments and remuneration, and such particulars of the nature and extent of their interests in the company as may be prescribed; and
• disclosures in such manner as may be prescribed about sources of promoter’s contribution;

Requirements Under Section 26 (1)(b)

The prospectus should contain:

• reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed;
• reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed: Provided that in case of a company with respect to which a period of five years has not elapsed from the date of incorporation, the prospectus shall set out in such manner as may be prescribed, the reports relating to profits and losses for each of the financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries;
• reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus: Provided that in case of a company with respect to which a period of five years has not elapsed from the date of incorporation, the prospectus shall set out in the prescribed manner, the reports made by the auditors upon the profits and losses of the business of the company for all financial years from the date of its incorporation, and assets and liabilities of its business on the last date before the issue of prospectus; and reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly;

Requirements Under Section 26 (1)(c):

• 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 thereunder; and state such other matters and set out such other reports, as may be prescribed.

Other Requirements:

• A declaration made by the Board or the Committee authorized by the Board in the prospectus that the allotment letters shall be issued or application money shall be refunded within fifteen days from the closure of the issue or such lesser time as may be specified by SEBI;
• It shall state such information and set out such reports on financial information as may be specified by the SEBI in consultation with the Central Government.
• Every prospectus issued to the public should mention that a copy of the prospectus along with the specified documents has been filed with the registrar.
• If prospectus includes a statement made by an expert, the expert must not be engaged or interested in the formation or promotion or in the management of the company. Written consent of the expert should also be obtained before the issue of the prospectus with the statement.
• A prospectus must not be issued more than 90 days after the date on which a copy thereof is delivered for registration. If a prospectus is issued it will be deemed to be a prospectus a copy of which has not been delivered to the registrar.
• A prospectus shall make a declaration about the compliance of the provisions of the act and nothing contained in the prospectus is in contravention of the provisions of the Companies Act, Securities Contracts (Regulation) Act, 1956 and Securities Exchange Board of India Act, 1992.
• Section 27 of the Act states that a company can vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, subject to the approval of an authority given by the company in general meeting by way of a special resolution. The details of the notice in respect of such resolution to shareholders shall also be published in the newspapers in the city where the registered office of the company is situated.

The Companies (Prospectus and Allotment of Securities) Rules, 2014 are the detail guidelines of requirements and contents of Prospectus.

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