Page 179 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes 9.16 Shelf-prospectus and Information Memorandum
(S. 60A and 60B)

Section 60A makes provisions for a self-prospectus in certain situation. 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

fi nancing shall file a shelf prospectus with the registrar. 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 fi nancial

position as have occured between the first offer of securities, 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 fi led 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 that prospectus.
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.
9.17 Information Memorandum

Section 60B provides as follows as regards information memorandum:
(i) A public company making an issue of securities may circulate information memorandum

to the public prior to filing of a prospectus.
(ii) A company inviting subscription by an information memorandum is bound to fi le a
prospectus prior to the opening of the subscription lists and the offer as a redherring
prospectus, at least three days before the opening of the offer.
The ‘red-herring’ prospectus means a prospectus which does not have complete particulars
on the price of the securities offered and the quantum of securities offered.

(iii) The information memorandum and red-herring prospectus shall carry same obligations as
are applicable in the case of a prospectus.
(iv) Any variation between the information memorandum and the red-herring prospectus shall
be highlighted as variations by the issuing company.
(v) Every variation as made and highlighted under (iv) is to be individually intimated to the
persons invited to subscribe to the issue of securities.

(vi) In the event of the issuing company or the underwriters to the issue 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 invest 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.
(vii) The applicant or proposed subscriber can exercise his right to withdraw from the application
on any intimation of variation within seven days from the date of such intimation and shall
indicate such withdrawal in writing to the company and the underwriters.

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