Page 99 - DCOM106_COMPANY_LAW

Company Law

Notes It also requires a declaration that all relevant provisions of the Act and the guidelines issued by
the government have been complied with and nothing has been stated in the prospectus that is
contrary to the provisions of the Act. Further, in clause 19 it has been stated that a company
which has not been in existence for five years, then the period of actual life shall be substituted
for five years.

7.3 Shelf Prospectus and Information Memorandum

Section 60A makes provisions for a shelf-prospectus in certain situations. A ‘shelf-prospectus’
means “a prospectus issued by any financial institution or bank, for one or more issues of the
securities or class of securities specified in that prospectus”.
Any public financial institution, public sector bank or scheduled bank whose main object is
financing, shall file a shelf prospectus with the registrar before issue of securities. In such a
situation, such a company need not file a prospectus afresh at every stage of offer of securities by
it within a period of validity not exceeding one year.
But a company, filing a shelf prospectus is required to file an Information Memorandum (as
given in s. 60B below), on all material facts relating to new charges created, changes in the
financial position as have occurred between the first offer of securities and previous offer of
securities within such period as may be prescribed by the Central Government, prior to making
of a second or subsequent offer of securities under the shelf prospectus.

An information memorandum shall be issued to the public, along with shelf prospectus filed at
the stage of the first offer of securities and, such prospectus shall be valid for a period of one
year, from the date of opening of the first issue of securities.
Where an update of information memorandum is filed every time an offer of securities is made,
such memorandum together with the shelf prospectus shall constitute the prospectus.
Section 60B provides as follows as regards information memorandum:
A public company making an issue of securities may circulate information memorandum
to the public prior to filing of a prospectus.
A company inviting subscription by an information memorandum is bound to file a
prospectus, prior to the opening of the subscription lists and the offer as a red-herring
prospectus, at least three days before the opening of the offer.

The information memorandum and red-herring prospectus shall carry same obligations
as are applicable in the case of a prospectus.

Any variation between the information memorandum and the red-herring prospectus
shall be highlighted as variations by the issuing company.
Every variation as made and highlighted under (iv) is to be individually intimated to the
persons invited to subscribe to the issue of securities.
In the event of the issuing company or the underwriters to the issue who have invited or
received advance subscription by way of cash or post-dated cheques or stock-invest, the
company or such underwriters or bankers to the issue shall not encash such subscription
moneys or post-dated cheques or stock invests before the date of opening of the issue,
without having individually intimated the prospective subscribers of the variation and,
without having offered an opportunity to such prospective subscribers to withdraw their
application and cancel their post-dated cheques or stock-invest or return of subscription
paid.

94 LOVELY PROFESSIONAL UNIVERSITY