Page 254 - DMGT407Corporate and Business Laws

Unit 11: Prospectus, Shares and Share Capital

Default in acceptance or refund of deposits to be cognizable (s. 58AAA). Every offence connected Notes
with or arising out of acceptance of deposits under s. 58A or s. 58AA is a cognizable offence
under the Code of Criminal Procedure, 1973.
Dating of prospectus (s.55). Section 55 states that every prospectus must be dated and that date is
deemed to be the date of publication of the prospectus.

Powers of SEBI. Section 55A provides that the provisions contained in sections 55 to 58, 59 to 81,
108-110, 112-113, 116-122, 206, 206A and 207, so far as they relate to issue and transfer of securities
and non-payment of dividend shall be administered by SEBI in the cases: (a) in case of listed
companies; (b) in case of those public companies which intend to get their securities listed on
any recognised stock exchange in India. In any other, case, the Central Government shall be the
administering authority.

11.1.9 Contents of a Prospectus

Section 56 lays down that the matters and reports stated in Schedule II to the Act must be
included in a prospectus. The format of a prospectus is divided into three parts. In the first part
brief particulars are to be given about matters mentioned below:

1. General information. Under this head information is given about (i) Name and address of
registered office of the company. (ii) Name(s) of stock exchange(s) where application for
listing is made. (iii) Declaration about refund of the issue if minimum subscription of 90 per
cent is not received within 90 days from closure of the issue. (iv) Declaration about the issue
of allotment letters/refunds within a period of 10 weeks and interest in case of any delay in
refund, at the prescribed rate, under s.73. (v) Date of opening of the issue. (vi) Date of closing
of the issue. (vii) Name and address of auditors and lead managers. (viii) Whether rating
from CRISIL or any rating agency has been obtained for the proposed debentures/preference
shares issue. If no rating has been obtained, this should be answered as ‘No’. (ix) Names and
address of the underwriters and the amount underwritten by them.
2. Capital structure of the company. (i) Authorised, issued, subscribed and paid-up capital.
(ii) Size of the present issue, giving separately reservation for preferential allotment to
promoters and others.
3. Terms of the present issue. (i) Terms of payment. (ii) How to apply. (iii) Any special tax
benefits.
4. Particulars of the issue. (i) objects. (ii) Project cost. (iii) Means of Financing (including
contribution of promoters).
5. Company management and project. (i) History and main objects and present business
of the company. (ii) Promoters and their background. (iii) Location of the project.
(iv) Collaborations, if any. (v) Nature of the product. (vi) Export possibilities. (vii) Future
prospects (viii) Stock market data for share/debentures of the company including high
and low price in each of the last three years and monthly high and low during the last six
months, if applicable.
6. Certain prescribed particulars in regard to the company and other listed companies under
the same management which made any capital issue during the last 3 years.

7. Outstanding litigations relating to financial matters or criminal proceedings against the
company or directors under Schedule XIII.
8. Management perception of risk factors (e.g., sensitivity to foreign exchange rate fluctuations,
difficulty in availability of raw materials or in marketing of products, cost/time overrun,
etc.)

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