Page 259 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes Any public financial institution, public sector bank or scheduled bank whose main object is
financing 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
financial position as have occurred 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 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 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.

11.1.17 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 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 ‘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 postdated cheques or stock-invest, the
company or such underwriters or bankers to the issue shall not encash such subscription
moneys or postdated 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 postdated 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.
(viii) Any application for subscription which is acted upon by the company or underwriters or
bankers to the issue without having given enough information of any variations, or the
particulars of withdrawing the offer or opportunity for canceling the postdated cheques

252 LOVELY PROFESSIONAL UNIVERSITY