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Unit 9: Prospectus

Intitial offer of securities to be in dematerialised form i certain cases (s. 68B). Every listed company, Notes
making initial public offer of any security for a sum of spaces ten crores or more, shall issue the
same only in dematerialised form by complying with the requisite provisions of the Depositories
Act, 1996 and regulations made thereunder.

9.24 Announcement regarding Proposed Issue of Capital

It is very common for companies to get an announcement regarding proposed issue of shares/
debentures inserted in the leading newspapers. It is not required by company law to do so. But
it is done in order to invite the attention of the public to the proposed issue. On the top of the
insertion it is given that. “It is only an announcement and not a prospectus”, in order to avoid
provisions under s.56 for publishing an incomplete prospectus.

9.25 Public Deposits

The invitation and acceptance of public deposits by companies were brought within the
jurisdiction of Companies Act in 1974. Rules have been framed prescribing the limits upto which,
the manner in which and the conditions subject to which deposits may be invited or accepted by
a company either from the public or from its members. Section 58-A and Companies (Acceptance
of Deposits) Rules made thereunder contains the restrictions and limitations subject to which
deposits may be invited and accepted by companies. The provisions of the Section and the
summary of the important rules made thereunder are as follows:

1. Meaning of deposit. Explanation to s.58-A defines the expression ‘deposit’ to mean any
deposit of money with and includes any amount borrowed by a company but shall not
include such categories or amount as may be prescribed in consultation with the Reserve
Bank of India.

Further rule 2 (b) provides that ‘deposit’ means any deposit of money with and includes any
amount borrowed by a company. However, the expression ‘deposit’ does not include:
(i) any amount received from the Central Government or a State Government or any
amount received from any other source and whose repayment is guaranteed by
the Central Government or State Government or any amount received from a local
authority or a foreign Government or any other foreign citizen, authority or person;
(ii) any amount received as a loan from any banking company including a co-operative
bank;

(iii) any amount received from any of the notifi ed fi nancial institutions;
(iv) any amount received by a company from any other company;
(v) any amount received from an employee of a company by way of security deposit;
(vi) any amount received by way of security or as an advance from any purchasing
agent, selling agent or other agents in course of or for the purposes of the business
of the company or any advance received against orders for the supply of goods or
properties or for the rendering of any services;
(vii) any amount received by way of subscriptions to any shares, stock, bonds or debentures
and any amount received by way of calls in advance on shares, in accordance with
the Articles of the company so long as such amount is not repayable to the members
under the Articles;
(viii) any amount received in trust or any amount in transit;

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