ALLOTMENT OF SHARES

Prospectus

Meaning

A prospectus is a document that invites the public to subscribe to a company’s shares or debentures. It contains details about the company’s financial position, risks, and objectives.

Legal Provisions under Companies Act, 2013

• Section 2(70): Defines a prospectus as a document issued for the public offering of securities.
  
  

• Section 26: Lists contents of a prospectus, including financial information, business details, and risk factors.
  
  

• Section 34 & 35: Holds directors and promoters liable for false or misleading statements.
  
  

Types of Prospectus

1. Red Herring Prospectus – Issued before the actual issue price is determined.
   
   

2. Shelf Prospectus – Used for multiple issues over time without re-filing.
   
   

3. Abridged Prospectus – A shorter version with key details.
   
   

Indian Case Law: SEBI v. Sahara (2012)

• Sahara raised money through Optionally Fully Convertible Debentures (OFCDs) without issuing a prospectus.
  
  

• The Supreme Court ruled that even private placements can require a prospectus if the public is invited.