Prospectus of a companyDEFINITION OF 'PROSPECTUS'A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.Also known as an "offer document."INVESTOPEDIA EXPLAINS 'PROSPECTUS'There are two types of prospectuses for stocks and bonds: preliminary and final. The preliminary prospectus is the first offering document provided by a securities issuer and includes most of the details of the business and transaction in question. Some lettering on the front cover is printed in red, which results in the use of the nickname "red herring" for this document. The final prospectus is printed after the deal has been made effective and can be offered for sale, and supersedes the preliminary prospectus. It contains finalized background information including such details as the exact number of shares/certificates issued and the precise offering price.In the case of mutual funds, which, apart from their initial share offering, continuously offer shares for sale to the public, the prospectus used is a final prospectus. A fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management.What is a Prospectus of a company?After getting the company incorporated, promoters will raise finances. The public is invited to purchase shares and debentures of the company through an advertisement. A document containing detailed information about the company and an invitation to the public subscribing to the share capital and debentures is issued. This document is called prospectuses. Private companies cannot issue a prospectus because they are strictly prohibited from inviting the public to subscribe to their shares. Only public companies can issue a prospectus.

Section 2 (36) of the Companies Act defines prospectus as, A prospectus means any document described or issued as prospectus and includes any notice, circular, advertisement or other documents invent deposits from public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate.The prospectus is not an offer in the contractual sense but only an invitation to offer. A document constructed to be a prospectus should be issued to the public. A prospectus should have the following essentials. There must be an invitation offering to the public. The invitation must be made on behalf of the company or intended company. The invitation must to be subscribed or purchase. The invitation must relate to shares or debentures.A prospectus must be field with the Registrar of companies before it is issued to the public. The issue of prospectus is essential when the company wishes the public to purchase its shares or debentures.If the promoters are confident of obtaining the required capital through private contacts, even a public company may not issue a prospectus. The promoters prepare a draft prospectus containing required information and this document is known as a statement is lieu of prospectus. A prospectus duly dated and signed by all the directors should be field with Register of Company before it is issued to the public.A prospectus brings to the notice of the public that a new company has been formed. The company tries to convince the public that it offers best opportunity for their investment. A prospectus outlines a detail the terms and conditions on which the shares or debentures have been offered to the public. Every prospectus contains an application from on which an intending investor can apply for the purchase of shares or debentures. A company must get minimum subscription within 120 days from the issue of prospectus. If it fails to obtain minimum subscription from the members of the public within the specified period, then the amount already received from public is returned. The company cannot get a certificate of commencement of business because the public is not interested in that company.ContentsThe following matters are to be disclosed in a prospectus: Name and full address of the company. Full particulars about the signatories to the memorandum of association and the number of shares taken up by them. The number and classes of shares. The interest of shareholders in the property and profits of the company. Name, address and occupations of members of the Board of Directors or proposed Directors. The minimum subscription fixed by promoters after taking into account all financial requirements at the beginning. If the company acquires any property from vendors, their full particulars are to be given. The full address of underwriters, if any, and the opinion of directors that the underwriters have sufficient resources to meet their obligations. The time of opening of the subscription list. The nature and extent of interest of every promoter in the promotion of the company. The amount payable on application, allotment and calls. The particulars of preferential treatment given to any person for subscribing shares or debentures. Particulars about reserves and surpluses. The amount of preliminary expenses. The name and address of the auditor. Particulars regarding voting rights at the meeting of the company. A report by the auditors regarding the profits and losses of the company. These are some of the contents which every prospectus must include. The prospectus is an advertisement of the company, so the company may give any information which promotes its interest. Any information given in the prospectus must be true, otherwise the subscribe can beheld guilty for misrepresentation.Statement in Lieu of ProspectusA public company raises its capital from the public and it issues prospectus for this purpose. Sometimes, the promoters of a company decide not to approach the public for raising necessary capital. They are hopeful of raising funds from the friends and relations or through underwriters. In that case a prospectus need not be issued but a Statement in Lieu of Prospectus must be field with the registrar at least three days before the first allotment of shares. Such a statement must be singed by every person who is named therein as a director or proposed director of the company. This statement will be drafted strictly in accordance with the particulars set out in a part I of Schedule III of the Act.

26. Matters to be stated in prospectus.(1) Every prospectus issued by or on behalf of a public company either withreference to its formation or subsequently, or by or on behalf of any person who is or hasbeen engaged or interested in the formation of a public company, shall be dated and signedand shall(a) state the following information, namely:(i) names and addresses of the registered office of the company, companysecretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, ifany, underwriters and such other persons as may be prescribed;(ii) dates of the opening and closing of the issue, and declaration aboutthe issue of allotment letters and refunds within the prescribed time;(iii) a statement by the Board of Directors about the separate bank accountwhere all monies received out of the issue are to be transferred and disclosure ofdetails of all monies including utilised and unutilised monies out of the previousissue in the prescribed manner;(iv) details about underwriting of the issue;(v) consent of the directors, auditors, bankers to the issue, experts opinion,if any, and of such other persons, as may be prescribed;(vi) the authority for the issue and the details of the resolution passedtherefor;(vii) procedure and time schedule for allotment and issue of securities;(viii) capital structure of the company in the prescribed manner;(ix) main objects of public offer, terms of the present issue and such otherparticulars as may be prescribed;

(x) main objects and present business of the company and its location,schedule of implementation of the project;(xi) particulars relating to(A) management perception of risk factors specific to the project;(B) gestation period of the project;(C) extent of progress made in the project;(D) deadlines for completion of the project; and(E) any litigation or legal action pending or taken by a GovernmentDepartment or a statutory body during the last five years immediatelypreceding the year of the issue of prospectus against the promoter of thecompany;(xii) minimum subscription, amount payable by way of premium, issue ofshares otherwise than on cash;(xiii) details of directors including their appointments and remuneration,and such particulars of the nature and extent of their interests in the company asmay be prescribed; and(xiv) disclosures in such manner as may be prescribed about sources ofpromoters contribution;(b) set out the following reports for the purposes of the financial information,namely:(i) reports by the auditors of the company with respect to its profits andlosses and assets and liabilities and such other matters as may be prescribed;(ii) reports relating to profits and losses for each of the five financial yearsimmediately preceding the financial year of the issue of prospectus includingsuch reports of its subsidiaries and in such manner as may be prescribed:

Provided that in case of a company with respect to which a period of fiveyears has not elapsed from the date of incorporation, the prospectus shall setout in such manner as may be prescribed, the reports relating to profits andlosses for each of the financial years immediately preceding the financial year ofthe issue of prospectus including such reports of its subsidiaries;(iii) reports made in the prescribed manner by the auditors upon theprofits and losses of the business of the company for each of the five financialyears immediately preceding issue and assets and liabilities of its business onthe last date to which the accounts of the business were made up, being a datenot more than one hundred and eighty days before the issue of the prospectus:Provided that in case of a company with respect to which a period of fiveyears has not elapsed from the date of incorporation, the prospectus shall setout in the prescribed manner, the reports made by the auditors upon the profitsand losses of the business of the company for all financial years from the date ofits incorporation, and assets and liabilities of its business on the last date beforethe issue of prospectus; and(iv) reports about the business or transaction to which the proceeds of thesecurities are to be applied directly or indirectly;(c) make a declaration about the compliance of the provisions of this Act and astatement to the effect that nothing in the prospectus is contrary to the provisions ofthis Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and ExchangeBoard of India Act, 1992 and the rules and regulations made thereunder; and(d) state such other matters and set out such other reports, as may be prescribed.(2) Nothing in sub-section (1) shall apply(a) to the issue to existing members or debenture-holders of a company, ofa prospectus or form of application relating to shares in or debentures of thecompany, whether an applicant has a right to renounce the shares or not undersub-clause (ii) of clause (a) of sub-section (1) of section 62 in favour of anyother person; or(b) to the issue of a prospectus or form of application relating to shares ordebentures which are, or are to be, in all respects uniform with shares or debenturespreviously issued and for the time being dealt in or quoted on a recognisedstock exchange.(3) Subject to sub-section (2), the provisions of sub-section (1) shall apply to aprospectus or a form of application, whether issued on or with reference to the formation ofa company or subsequently.Explanation.The date indicated in the prospectus shall be deemed to be the date ofits publication.(4) No prospectus shall be issued by or on behalf of a company or in relation to anintended company unless on or before the date of its publication, there has been delivered tothe Registrar for registration, a copy thereof signed by every person who is named therein asa director or proposed director of the company or by his duly authorised attorney.(5) A prospectus issued under sub-section (1) shall not include a statement purportingto be made by an expert unless the expert is a person who is not, and has not been, engagedor interested in the formation or promotion or management, of the company and has givenhis written consent to the issue of the prospectus and has not withdrawn such consentbefore the delivery of a copy of the prospectus to the Registrar for registration and a statementto that effect shall be included in the prospectus.(6) Every prospectus issued under sub-section (1) shall, on the face of it,(a) state that a copy has been delivered for registration to the Registrar asrequired under sub-section (4); and(b) specify any documents required by this section to be attached to the copy sodelivered or refer to statements included in the prospectus which specify thesedocuments.(7) The Registrar shall not register a prospectus unless the requirements of this sectionwith respect to its registration are complied with and the prospectus is accompanied by theconsent in writing of all the persons named in the prospectus.(8) No prospectus shall be valid if it is issued more than ninety days after the date onwhich a copy thereof is delivered to the Registrar under sub-section (4).(9) If a prospectus is issued in contravention of the provisions of this section, thecompany shall be punishable with fine which shall not be less than fifty thousand rupees butwhich may extend to three lakh rupees and every person who is knowingly a party to theissue of such prospectus shall be punishable with imprisonment for a term which may extendto three years or with fine which shall not be less than fifty thousand rupees but which mayextend to three lakh rupees, or with both.

Complete Guide To Investment Companies, Funds And REITsHow To Read A Prospectus - Reading A ProspectusYou've probably heard it said more than once that you should always consult amutual fund'sprospectusbefore handing over your money. The same advice applies to unit investment trusts (UITs), exchange-traded funds (ETFs) and REITS.

While mutual funds and UITs are legally required to provide aprospectusto prospective investors, it's no secret that the size of this document and the type of information inside can be hard to tackle, but don't be too overwhelmed. Here is a guide to what a prospectus is, why it is important and what items should be central to your considerations.

What Is a Prospectus?A prospectus is a formal legal document, which is required by and filed with theSecurities and ExchangeCommission. It provides details about an investment offering for sale to the public, including fees, investment objectives and strategies, as well as the finer points of the past performance, risks, performance, distribution policy, fees and expenses, and fund management.

You can obtain these documents directly from fund companies through mail, email or phone. You can also get them from a financial planner or advisor. Many fund companies also provide PDF versions of their prospectuses on their websites.How To Read A Prospectus - Investment Objectives And StrategiesInvestment ObjectivesThese are the fund's financial goals, which are reflected in the types of securities chosen to achieve those goals. Types of investment objectives include long-termcapital growth, stable income, high total return, etc. Fund companies cannot change these objectives unless investors of the fund consent to the changes through a vote.

It is important to determine whether the fund's goals match your owninvestment goals. For example, a fund with an above-average capital growth objective would probably not be a good fit for an 89-year-old widow who needs regular income from investments to cover day-to-day expenses.Investment StrategiesThis part of the prospectus explains the way in which a fund allocates and manages its resources to achieve its investment objectives. Aspects considered when designing such a strategy include setting goals fornet asset value, determiningasset allocation, investment restrictions (such as onlyinvestingin a certain industry) and deciding whether (and how)derivativesmay be used.

A fund's investment strategy, like its goals, should be in sync with your investment style. For example, although asmall capfund and alarge capequity fund are both aiming for long-term capital appreciation, they are both using very different strategies to reach this goal. Before choosing one type of fund over another, make sure you consider why investing in any one of these asset types is right for you. Otherwise, you might be in for some surprises!

How To Read A Prospectus - Risks And Past PerformanceRisksBecause investors have varying degrees ofrisk tolerance, therisksection of a prospectus is very important. It details the risks associated with a particular fund, such ascredit risk,interest rate risk,market risk, etc.

To get the most out of this section, you should be familiar with what distinguishes the different kinds of risk, why they are associated with particular funds, and how they fit into the balance of risk in your overallportfolio. For example, if a fund invests a large portion of its assets into foreign securities, you need to understand that this may pose significant foreign-exchange andcountry risk;but you also need to determine whether this kind of risk works with other types of risk in your portfolio in satisfying your tolerance.Past PerformanceThis section shows you the fund's track record, but do remember the common disclaimer that "past performance is not an indication of future performance." Read the historical performance of the fund critically and make sure to take into account both long- and short-term performance. Also, make sure thebenchmarkchosen by the fund is appropriate. For example, using the performance of federaltreasury billsas a benchmark for anequity fundis useless; theS&P 500is generally the accepted benchmark for equities. In addition, keep in mind that many of the returns presented in historicaldatadon't account for tax, or some funds calculate an after-tax return with a rate that may be higher or lower than your own. Be sure to look at any fine print in these sections, as they should say whether or not taxes have been taken into account.How To Read A Prospectus - Distributions, Fees And ManagementDistribution PolicyThedistributionsa fund pays its investors come from realizedcapital gains,dividends, interest or other income stemming from the securities and investing activities of the fund. The distribution policy tells you how these payments are made. Some funds distribute returns directly to unitholders, while others reinvest the distributions back into the fund, buying more units for fundholders.Whether these distributions are paid in cash or reinvested, unitholders have to pay taxes on them. If you are concerned about taxes, there are tax-managed funds that limit income and capital gain distributions. These tax-managed funds allow you to ensure that you maximize the use of your tax-sheltered options, such as your401(k)orIRA.Fees and ExpensesThis section is extremely important to consider, because fees and expenses will eat into your total investment return from the fund. Here you will find information on anybackorfront-end loads,12B-1 feesand themanagement expense ratio. Because these compromise your return regardless of the fund's performance, it is rarely optimal toinvestin funds with loads.

Fund ManagementHere you can discover how long yourfund managerhas been managing your fund. Watch out for the fund that has been in operation significantly longer than the fund manager has been managing it. The performance of such a fund can be credited not to the present manager, but to the previous ones. If the current manager has been managing the fund for only a short period of time, look into his or her past performance with other funds with similar investment goals and strategies. You can then get a better gauge of his or her talent and investment style.

After reading the sections of the prospectus outlined above, you will have a good idea of how the fund functions and what risks it may pose. Most importantly, you'll be able to determine whether it is right for you. If you need more information beyond what the prospectus provides, you can consult the fund'sannual report, which is available directly from the fund company or through a financial professional.Preliminary ProspectusDEFINITION OF 'PRELIMINARY PROSPECTUS'A first draft registration statement filed by a firm prior to proceeding with an initial public offering of securities. The document, filed with the Securities & Exchange Commission, is intended to provide pertinent information to prospective shareholders about the company's business description, management, strategic initiatives, financial statements and ownership structure.INVESTOPEDIA EXPLAINS 'PRELIMINARY PROSPECTUS'The SEC requires a preliminary prospectus to be printed with red ink on the left side of the cover; as a result, the document has been nicknamed the "red herring".

Role of Prospectus in a CompanyMany governments feel that if they allow private companies to issue prospectuses, the opposition and other pressure groups may allege the involvement of government in the malpractices of private companies.A company is bound to raise finances for its sustenance and growth. For this purpose usually the public is invited to purchase shares and debenture of the company through an announcement.

A document containing detailed information about the company and an invitation to the public regarding subscription to shares and debentures is called a company prospectus. In many countries private companies cannot issue a prospectus because they are sternly forbidden from inviting the public to subscribe to their shares.

Only public companies can issue a prospectus. Actually this is done to avoid various kinds of malpractices that private companies tend to indulge in. Many a time it has happened that private companies have robbed public of their hard earned money.

So, many governments feel that if they allow private companies to issue prospectuses, the opposition and other pressure groups may allege the involvement of government in the malpractices of private companies.

Lets be clear about the fact that a prospectus is not an offer in the contractual sense but only an invitation to offer. A document construed to be a prospectus should be issued to the public.

A prospectus should have the fundamentals like, it must be an invitation offering to the public and it must be made on the behalf of the company. A prospectus must be filed with the registrar of companies before it is issued to the public.

If the promoters are certain of obtaining the requisite capital through private contacts, even a public company may not issue a prospectus. The promoters prepare a summary prospectus containing obligatory information and this document is known as a statement representing a prospectus.

A prospectus duly dated and signed by all the directors is to be filed to the registrar. A prospectus brings to the notice of the public that a new company has been formed.

The company tries to persuade the public that it will provide the best prospects for their investment. A prospectus outlines in detail the terms and conditions on which the shares have been offered. Usually, the orders for the procurement of shares are done via an application that comes along with the prospectus.

What Is a Company Prospectus?A company prospectus is a document that provides comprehensive information about a company. This information can be used by prospective investors to decide whether they want to invest and what kinds of investment products they want to buy. Companies make their prospectuses available on request to anyone who asks for them and many host versions on their websites to make them easy to access.When a company is preparing aninitial public offering, it is required to file a prospectus, along with other documents, with regulators. The regulators review the information to confirm that it is accurate and complete. Passing a review does not mean that a company is endorsed by regulators; it simply indicates that the documentation provided is correct and the regulators have approved the company for an initial public offering. A subsequent company prospectus will be released each year with updated information.There are legal requirements that describe what a company prospectus must include, and these vary by region. As a general rule, the document needs to contain information about the company that would help investors arrive at an informed decision when they decide to invest. It also contains information about the investment products, such as stocks and bonds, that the company makes available.Prospectus in Company LawA prospectus means any document describe or issue as a prospectus and includes any notice, circular, advertisement or other documents inviting deposits from the public or inviting offers from the public for the subscription or purchase of shares in or debentures of a day corporate.IntroductionFrom the above definition, it is clear that a prospectus is a document that invites the public to subscribe to the share capital or debentures of a company. If it does not do that, it cannot be called a prospectus. According to the Companies (Amendment) Act, 1971, an invitation to the public inviting deposits is also deemed to be a prospectus. Some companies do not directly to the public themselves, but allot the entire share capital to an intermediary, which then offers the shares to the public by an advertisement of its own. Any document by which such offer for sale to public is made is deemed to be a prospectus[1].After getting the company incorporated, promoters will raise finances. The public is invited to purchase shares and debentures of the company through an advertisement. A document containing detailed information about the company and an invitation to the public subscribing to the share capital and debentures is issued. This document is called prospectuses. Private companies cannot issue a prospectus because they are strictly prohibited from inviting the public to subscribe to their shares. Only public companies can issue a prospectus. Section 2 (36) of the Companies Act defines prospectus as, A prospectus means any document described or issued as prospectus and includes any notice, circular, advertisement or other documents invent deposits from public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate[2].The prospectus is not an offer in the contractual sense but only an invitation to offer. A document constructed to be a prospectus should be issued to the public. A prospectus should have the following essentials. There must be an invitation offering to the public. The invitation must be made on behalf of the company or intended company. The invitation must to be subscribed or purchase. The invitation must relate to shares or debentures.A prospectus must be filed with the Registrar of companies before it is issued to the public. The issue of prospectus is essential when the company wishes the public to purchase its shares or debentures.If the promoters are confident of obtaining the required capital through private contacts, even a public company may not issue a prospectus. The promoters prepare a draft prospectus containing required information and this document is known as a statement is lieu of prospectus. A prospectus duly dated and signed by all the directors should be field with Register of Company before it is issued to the public.A prospectus brings to the notice of the public that a new company has been formed. The company tries to convince the public that it offers best opportunity for their investment. A prospectus outlines a detail the terms and conditions on which the shares or debentures have been offered to the public. Every prospectus contains an application from on which an intending investor can apply for the purchase of shares or debentures. A company must get minimum subscription within 120 days from the issue of prospectus. If it fails to obtain minimum subscription from the members of the public within the specified period, then the amount already received from public is returned. The company cannot get a certificate of commencement of business because the public is not interested in that company[3].Object of a prospectusThe objects of issuing a prospectus are as under:1. To invite the public to invest in the shares or debenture of a market.2. To give a bureau of a condition on which the public is invited to invest in shares and debentures.3. To make a declaration that the directors of the company are liable for the condition stated in the prospectus.Nature of prospectus:As said earlier that the prospectus is an invitation to the public to invest in the shares or debentures of a company. But the term public is nowhere defined in the Companies Act. So, far as it is related to prospectus, public is meant to be the ordinary common people[4]. Whether or not the invitation for investment is made to the public depends upon some situation, such as:1. How many copies of the prospectus were printed?2. To how many members of the public were the copies distributed.3. How many members of the public accepted the copies?4. Under what conditions did the member of the public accept the prospectus?When the prospectus need to be issuedIn the following situation, there is no need for a prospectus to be issued.1. When the shares and debentures are to be allotted to the existing holders of shares and debentures.2. When the shares and debenture to be allotted are similar to the current (already issued) shares and debentures that are being traded in a recognized stock exchange.3. When the allotment of shares and debenture is not permissible by law as in the case of a private company.4. When the invitation is to some such person who has a contract for underwriting the shares and debentures of the company[5].Golden rule in prospectusProspectus is the basis of the contract between the company and the persons who incest in the companys shares or debentures. The officers of the company have knowledge of the companys present status and its prospects in future or have the means to acquire such knowledge. But the potential investor has no such knowledge, nor the means to acquire it. It, therefore, becomes the duty of those who issue the prospectus that they not only projects the companys image in the right perspective but also makes sure that no vital information which could be of interest to the potential investors in the companys shares and debentures is left out from the companys prospectus. it therefore become important that the prospectus states the basic important facts about the company with utmost honesty and good faith and that no information that is important is twisted or partially presented. That is what is refers to as the golden rule for making a prospectus.In short the following must be kept in mind when preparing the prospectus of a company:1. The prospectus must be an honest statement of the companys profile; there must be no misleading, ambiguous or erroneous reference to the company in its prospectus.2. Every important aspect of a contract of the company should be clarified.3. The contents of the prospectus should conform to the provision of the Companies Act.4. The restrictions on the appointment of directors must be kept in mind.5. The conditions of civil liability as laid down must be strictly adhered to issue and registration of prospectus or legal requirement regarding issue of prospectus[6].Legal requirement regarding issue of prospectus:The Companies Act has defined some legal requirements about the issue and registration of a prospectus. The issue of the prospectus would be deemed to be legal only if the requirements are met.1.Issue after the incorporation:As a rule, the prospectus of a company can only be issued after its incorporation. A prospectus issued by, or on behalf of a company, or in relation to an intended company, shall be dated, and that date shall be taken as the date of publication of the prospectus.2. Registration of prospectus:it is mandatory to get the prospectus registered with the Registrar of Companies before it is issued to the public. The procedure of getting the prospectus registered is as under:a. A copy of the prospectus, duly signed by every person who is named therein as a director or a proposed director of the company must be filed with Registrar of Companies before the prospectus is issued to the public.b. The following document must be attached thereto:(i) Consent to the issue of the prospectus required under any person as an expert confirming his written consent to the issue thereof, and that he has not withdrawn his consent as aforesaid appears in the prospectus.(ii) Copies of all contracts entered into with respect to the appointment of the managing director, directors and other officers of the company must also be filed with Registrar.(iii) If the auditor or accountant of the company has made any adjustments in the companys account, the said adjustments and the reasons thereof must be filed with the documents.(iv) There must be a copy of the application which is to be filled for the issue of the companys shares and debentures attached with the prospectus.(v) The prospectus must have the written consent of all the persons who have been named as auditors, solicitors, bankers, brokers, etc.c. Every prospectus must have, on the face of it, a statement that:(i) A copy of the prospectus has been delivered to the Registrar for registration.(ii) Specifies that any documents required to be endorsed by this section have been delivered to the Registrar.d. A copy of the prospectus must be filed with the Registrar of Companies. The Registrar should register the prospectus only when:(i) The prospectus is dated. The date shall, unless the contrary is proved, be taken as the date of publication of the prospectus.(ii) The contents of prospectus conform to Section 56 of the Act.(iii) The consent of the expert, if it is necessary, has been obtained. But such expert should not be engaged or interested in the formation or promotion of the company.(iv) The written consent of the expert with respect to the issue of his statement included in the prospectus has been obtained.If the above provision of law has been fulfilled, or the necessary documents have nit been attached, the Registrar can refuse to register the companys prospectus.e. According to the Section 60(4), no prospectus shall be issued more than ninety days after the date on which a copy thereof is delivered for registration. Of the prospectus is so issued. It shall be deemed to be a prospectus a copy of which has not been delivered to the Registrar.If a prospectus issued in contravention of the above stated provisions, then the company and every person who knows a party to the issue of the prospectus shall be punishable with a fine[7].Contents of prospectusThe main contents of a prospectus are:1. Main object of the company with the names, addresses, description and occupation of signatories to the memorandum and the number of shares subscribed for by them.2. Number and classes of shares and the nature and extent of the interest of holders thereof in the property and profits of the company.3. The number of redeemable preference shares intended to be issued and the date of redemption or where no date is fixed; the period of notice required for redeeming the share s and proposed method of redemption.4. The number of shares. If any, fixed by the Article as the qualification of a director and the remuneration of the directors for the service.5. The names, occupation and addresses of directors, managing director and manager together with any provision in the Articles or a contract regarding their appointment remuneration or compensation for loss of office.6. The time of opening of the subscription list should be given in the prospectus.7. The amount payable on application and allotment on each share should be stated. If any prospectus is issued within two years, the details of the shares subscribed for any allotted.8. The particular about any option or preferential right to be given to any person to subscribe for shares or debentures of the company.9. The number of shares or debentures which within the two preceding year been issued for a considerations other than cash.10. Particulars about premium received on shares within two preceding years or to be received.11. The amount or rate of underwriting commission.12. Preliminary expenses.13. The names and addresses of auditors, if any, of the company.14. Where the shares are of more than one class, the rights of voting and rights as to capital and dividend attached to several classes of shares.15. If nay reserve or profits of the company have been capitalized, particulars of capitalizations and particulars of the surplus arising from any revaluation of the assets of the company.16. A reasonable time and place at which copies of all accounts on which the report of auditors is based may be inspected[8].ConclusionA public company raises its capital from the public and it issues prospectus for this purpose. Sometimes, the promoters of a company decide not to approach the public for raising necessary capital. They are hopeful of raising funds from the friends and relations or through underwriters. In that case a prospectus need not be issued but a Statement in Lieu of Prospectus must be filed with the registrar at least three days before the first allotment of shares. Such a statement must be signed by every person who is named therein as a director or proposed director of the company. This statement will be drafted strictly in accordance with the particulars set out in a part I of Schedule III of the Act.1. INTRODUCTION Financial markets have an important relationship with economic development. A company decides to issue securities for different reasons; the main reason being raising capital to meet its financial requirements may be for starting a venture, repaying debts, expansion and diversification. This actually reflects indulgence of enormous investor wealth for the sublime reason of economic development. This economic dependence of the corporate sector is a compelling rationale for an orderly regulated environment that boosts investor confidence and assures conformity with prescribed norms. It helps in creating conducive ownership base and wide capacities to create an impact on the national economy. When an investor buys securities he is enabling the company to carry on its business using those funds. In India a company planning to issue securities shall abide by relevant provisions of (a) Securities Contracts (Regulation) Act, 1956, (b) Securities Contracts (Regulation) Rules, 1957, (c) Companies Act, 2013 (hereinafter referred to as the Act) and The Companies ( Prospectus and Allotment of Securities) Rules, 2014, (d) Securities and Exchange Board of India Act, 1992 and the rules and regulations made there under.MATTERS TO BE STATED IN PROSPECTUS According to section 26(1) of the Act read with Companies (Prospectus and Allotment of Securities) Rules, 2014 (hereinafter referred to as Rules), the following are the matters to be included in a prospectus: (i) Names and addresses of the registered office of the company, Company Secretary, Chief Financial Officer, auditors, legal advisers, bankers, trustees, if any, underwriters and such other persons as may be prescribed. The rules provide that the names, addresses and contact details of the corporate office of the issuer company, compliance officer of the issuer company, merchant bankers and co-managers to the issue, registrar to the issue, bankers to the issue, stock brokers to the issue, credit rating agency for the issue, arrangers, if any, of the instrument, names and addresses of such other persons as may be specified by the Securities and Exchange Board in its regulations shall be included in prospectus.(ii) Dates of the opening and closing of the issue, and declaration about the issue of allotment letters and refunds within the prescribed time; The rules clearly specify that the dates of opening and closing of the issue shall be prominently disclosed. Further the rules provide that the Board or the Committee authorized thereof shall make a declaration in the prospectus that the allotment letters shall be issued or application money shall be refunded within fifteen days from the closure of the issue or such lesser time as may be specified by SEBI or else the application money shall be refunded to the applicants forthwith, failing which interest shall be due to be paid to the applicants at the rate of fifteen per cent per annum for the delayed period. (iii) A statement by the Board of Directors about the separate bank account where all monies received out of the issue are to be transferred and disclosure of details of all monies including utilised and unutilised monies out of the previous issue in the prescribed manner. The rules specify that the a statement shall be given by the Board of directors that all monies received out of the issue shall be transferred to a separate bank account maintained with a Scheduled Bank. Section 2(80) of the Act scheduled bank means the scheduled bank as defined in clause (e) of section 2 of the Reserve Bank of India Act, 1934. The referred section enumerates a list of scheduled banks under second schedule of the Reserve Bank of India Act, 1934. Further the aforesaid rules provide that the details of all utilized and unutilised monies out of the monies collected in the previous issue made by way of public offer shall be disclosed and continued to be disclosed in the balance sheet till the time any part of the proceeds of such previous issue remains unutilized indicating the purpose for which such monies have been utilized, and the securities or other forms of financial assets in which such unutilized monies have been invested.(iv) Details about underwriting of the issue. As per the rules, the details about underwriting of the issue shall include the names, addresses, telephone numbers, fax numbers and e-mail addresses of the underwriters and the amount underwritten by them. (v) Consent of the directors, auditors, bankers to the issue, experts opinion, if any, and of such other persons, as may be prescribed. As per the rules, the consent of trustees, solicitors or advocates, merchant bankers to the issue, registrar to the issue, lenders and experts shall also be included in prospectus. (vi) The authority for the issue and the details of the resolution passed therefor. (vii) Procedure and time schedule for allotment and issue of securities. (viii) Capital structure of the company in the prescribed manner. As per the rules, capital structure of the company shall be presented in the following manner: (i) (a) the authorised, issued, subscribed and paid up capital (number of securities, description and aggregate nominal value); (b) the size of the present issue; (c) the paid up capital- (A) after the issue; (B) after conversion of convertible instruments (if applicable); (d) the share premium account (before and after the issue); (ii) The details of the existing share capital of the issuer company in a tabular form, indicating therein with regard to each allotment, the date of allotment, the number of shares allotted, the face value of the shares allotted, the price and the form of consideration. In the case of an initial public offer of an existing company, the details regarding individual allotment shall be given from the date of incorporation of the issuer and in the case of a listed issuer company the details shall be given for five years immediately preceding the date of filing of the prospectus.The issuer company shall also disclose the number and price at which each of the allotments were made in the last two years preceding the date of the prospectus separately indicating the allotments made for considerations other than cash and the details of the consideration in each case. (iii) main objects of public offer, terms of the present issue and such other particulars as may be prescribed. As per the rules the prospectus to be issued shall contain the following particulars, namely: - (a) the objects of the issue; (b) the purpose for which there is a requirement of funds; (c) the funding plan (means of finance); (d) the summary of the project appraisal report (if any); (e) the schedule of implementation of the project; (f) the interim use of funds, if any (x) main objects and present business of the company and its location, schedule of implementation of the project. (xi) particulars relating to a. management perception of risk factors specific to the project; b. gestation period of the project; c. extent of progress made in the project; d. deadlines for completion of the project; and e. any litigation or legal action pending or taken by a Government Department or a statutory body during the last five years immediately preceding the year of the issue of prospectus against the promoter of the company. The rules with respect to sub part (e) states that the prospectus to be issued shall contain the following details and disclosures, namely:- (i) the details of any litigation or legal action pending or taken by any Ministry or Department of the Government or a statutory authority against any promoter of the issuer company during the last five years immediately preceding the year of the issue of the prospectus and any direction issued by such Ministry or Department or statutory authority upon conclusion of such litigation or legal action shall be disclosed;(ii) the details of pending litigation involving the issuer, promoter, director, subsidiaries, group companies or any other person, whose outcome could have material adverse effect on the position of the issuer; (iii) the details of pending proceedings initiated against the issuer company for economic offences; (iv) the details of default and non-payment of statutory dues etc. (xii) minimum subscription, amount payable by way of premium, issue of shares otherwise than on cash. (xiii) details of directors including their appointments and remuneration, and such particulars of the nature and extent of their interests in the company as may be prescribed. As per the rules the details of directors including their appointment and remuneration, and particulars of the nature and extent of their interests in the company shall be disclosed in the following manner, namely:- (i) the name, designation, Director Identification Number (DIN), age, address, period of directorship, details of other directorships; (ii) the remuneration payable or paid to the director by the issuer company, its subsidiary and associate company; shareholding of the director in the company including any stock options; shareholding in subsidiaries and associate companies; appointment of any relatives to an office or place of profit; (iii) the full particulars of the nature and extent of interest, if any, of every director: (a) in the promotion of the issuer company; or (b) in any immoveable property acquired by the issuer company in the two years preceding the date of the Prospectus or any immoveable property proposed to be acquired by it.(iv) where the interest of such a director consists in being a member of a firm or company, the nature and extent of his interest in the firm or company, with a statement of all sums paid or agreed to be paid to him or to the firm or company in cash or shares or otherwise by any person either to induce him to become, or to help him qualify as a director, or otherwise for services rendered by him or by the firm or company, in connection with the promotion or formation of the issuer company shall be disclosed. (xiv) disclosures in such manner as may be prescribed about sources of promoters contribution; As per the rules the sources of promoters contribution, if any, shall be disclosed in the following manner, namely:- (i) the total shareholding of the promoters, clearly stating the name of the promoter, nature of issue, date of allotment, number of shares, face value, issue price or consideration, source of funds contributed , date when the shares were made fully paid up, percentage of the total pre and post issue capital; (ii) the proceeds out of the sale of shares of the company and shares of its subsidiary companies previously held by each of the promoters; (iii) the disclosure for sources of promoters contribution shall also include the particulars of name, address and the amount so raised as loan, financial assistance etc , if any, by promoters for making such contributions and in case of own sources, complete details thereof. The Prospectus shall also contain the following reports for the purpose of financial information: i. Reports by the auditors of the company with respect to its profits and losses and assets and liabilities and such other matters as may be prescribed. The rules under the prescribed power provide that (a) reports by the auditors with respect to profits and losses and assets and liabilities shall also include the amounts or rates of dividends, if any, paid by the issuer company in respect of each class of shares for each of the five financial years immediately preceding the year of issue of the prospectus, giving particulars of each class of shares on which such dividends have been paid and particulars of the cases in which no dividends have been paid in respect of any class of shares for any of those years; andb) if no accounts have been made up in respect of any part of the period of five years ending on a date three months before the issue of the prospectus, a statement of that fact accompanied by a statement of the accounts of the issuer company in respect of that part of the said period up to a date not earlier than six months of the date of issue of the prospectus indicating the profit or loss for that period and assets and liabilities position as at the end of that period together with a certificate from the auditors that such accounts have been examined and found correct and the said statement may indicate the nature of provision or adjustments made or which are yet to be made. ii. reports relating to profits and losses for each of the five financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries and in such manner as may be prescribed: Provided that in case of a company with respect to which a period of five years has not elapsed from the date of incorporation, the prospectus shall set out in such manner as may be prescribed, the reports relating to profits and losses for each of the financial years immediately preceding the financial year of the issue of prospectus including such reports of its subsidiaries; The rules under the prescribed power provides reports relating to profits and losses for each of the five financial years or where five financial years have not expired, for each of the financial year immediately preceding the financial year of the issue of the prospectus shall: (a) if the company has no subsidiaries, so far as regards its profits and losses, deal separately with the profits or losses of the company (distinguishing items of a non-recurring nature) for each of the five financial years immediately preceding the year of the issue of the prospectus; and (b) if the company has subsidiaries, deal either - (i) as a whole with the combined profits or losses of itsProspectus and Allotment of Securities 11 subsidiaries, so far as they concern members of the issuer company; or (ii) individually with the profits or losses of each subsidiary, so far as they concern members of the issuer company; or (iii) as a whole with the profits or losses of the company, and, so far as they concern members of the issuer company, with the combined profits or losses of its subsidiaries. (c) The mode adopted at b above should be specified in the prospectus iii. reports made in the prescribed manner by the auditors upon the profits and losses of the business of the company for each of the five financial years immediately preceding the issue and assets and liabilities of its business on the last date to which the accounts of the business were made up, being a date not more than one hundred and eighty days before the issue of the prospectus: Provided that in case of a company with respect to which a period of five years has not elapsed from the date of incorporation, the prospectus shall set out in the prescribed manner, the reports made by the auditors upon the profits and losses of the business of the company for all financial years from the date of its incorporation, and assets and liabilities of its business on the last date before the issue of prospectus; and The rules provide that the reports made by the auditors in respect of the business of the company shall be stated in the prospectus in the manner provided in rules for subsection 26(1) (b)(ii) (above stated). iv. reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly; Section 26(1)(c) of the Act provides that the issuer company shall make a declaration in the prospectus about the compliance of the provisions of this Act and a statement to the effect that nothing in the prospectus is contrary to the provisions of this Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 and the rules and regulations made thereunder; and12 Prospectus and Allotment of Securities Under the empowerment of delegated authority under section 26(1)(d) of the Act, the rules state other information, matters and reports, as under to be stated in the prospectus: (1) If the proceeds, or any part of the proceeds, of the issue of the shares or debentures are or is to be applied directly or indirectly (a) in the purchase of any business; or (b) in the purchase of an interest in any business and by reason of that purchase, or anything to be done in consequence thereof, or in connection therewith; the company will become entitled to an interest as respects either the capital or profits and losses or both, in such business exceeding fifty per cent, thereof; a report made by chartered accountants (who shall be named in the prospectus) upon: (i) the profits or losses of the business for each of the five financial years immediately preceding the date of the issue of the prospectus; and (ii) the assets and liabilities of the business as on the last date to which the accounts of the business were made up, being a date not more than one hundred and twenty days before the date of the issue of the prospectus; (c) In case of purchase or acquisition of any immovable property including indirect acquisition of immovable property for which advances have been paid to even third parties, the following disclosures shall be made- (i) the names, addresses, descriptions and occupations of the vendors; (ii) the amount paid or payable in cash, to the vendor and, where there is more than one separate vendor, or the company is a sub-purchaser, the amount so paid or payable to each vendor, specifying separately the amount, if any, paid or payable for goodwill; (iii) the nature of the title or interest in such property proposed to be acquired by the company; (iv) short particulars of every transaction relating to the property completed within the two preceding years,in which any vendor of the property to the company or any person who is, or was at the time of the transaction, a promoter, or a director or proposed director of the company had any interest, direct or indirect, specifying the date of transaction and the name of such promoter, director or proposed director and stating the amount payable by or to such vendor, promoter, director or proposed director in respect of the transaction. (2) Further the rules provide that a report shall be made by Chartered Accountants (who shall be named in the prospectus) if (i) the proceeds, or any part of the proceeds, of the issue of the shares or debentures are or is to be applied directly or indirectly in any manner resulting in the acquisition by the company of shares in any other body corporate; and (ii) by reason of that acquisition or anything to be done in consequence thereof or in connection therewith, that body corporate will become a subsidiary of the company. Such report prepared by chartered accountant shall be prepared upon: (A) the profits or losses of the other body corporate for each of the five financial years immediately preceding the issue of the prospectus; and (B) the assets and liabilities of the other body corporate as on the last date to which its accounts were made up. Further the aforesaid report said report shall: (i) indicate how the profits or losses of the other body corporate dealt with by the report would, in respect of the shares to be acquired, have concerned members of the issuer and what allowance would have fallen to be made, in relation to assets and liabilities so dealt with for holders of other shares, if the issuer had at all material times held the shares to be acquired; and (ii) where the other body corporate has subsidiaries, deal with the profits or losses and the assets and liabilities of the body corporate and its subsidiaries in the manner similar to that of rules pursuant to 26(1) (b)(ii). (3) The matters relating to terms and conditions of the term loans including re-scheduling, prepayment, penalty, default. (4) The aggregate number of securities of the issuer company and its subsidiary companies purchased or sold by the promoter group and by the directors of the company which is a promoter of the issuer company and by the directors of the issuer company and their relatives within six months immediately preceding the date of filing the prospectus with the Registrar of Companies shall be disclosed. The term promoter has been defined in section 2(69) so as to mean a person (a) who has been named as such in a prospectus or is identified by the company in the annual return referred to in section 92; or (b) who has control over the affairs of the company, directly or indirectly whether as a shareholder, director or otherwise; or (c) in accordance with whose advice, directions or instructions the Board of Directors of the company is accustomed to act: Nothing in sub-clause (c) shall apply to a person who is acting merely in a professional capacity. (5) The matters relating to (A) Material contracts; (B) Other material contracts; (C) Time and place at which the contracts together with documents will be available for inspection from the date of prospectus until the date of closing of subscription list. (6) The related party transactions entered during the last five financial years immediately preceding the issue of prospectus as under - (a) all transactions with related parties with respect to giving of loans or, guarantees, providing securities in connection with loans made, or investments made;

(b) all other transactions which are material to the issuer company or the related party, or any transactions that are unusual in their nature or conditions, involving goods, services, or tangible or intangible assets, to which the issuer company or any of its parent companies was a party. The disclosures for related party transactions for the period prior to notification of these rules shall be to the extent of disclosure requirements as per the Companies Act, 1956 and the relevant accounting standards prevailing at the said time. (7) The summary of reservations or qualifications or adverse remarks of auditors in the last five financial years immediately preceding the year of issue of prospectus and of their impact on the financial statements and financial position of the company and the corrective steps taken and proposed to be taken by the company for each of the said reservations or qualifications or adverse remarks. (8) The details of any inquiry, inspections or investigations initiated or conducted under the Companies Act or any previous companies law in the last five years immediately preceding the year of issue of prospectus in the case of company and all of its subsidiaries; and if there were any prosecutions filed (whether pending or not); fines imposed or compounding of offences done in the last five years immediately preceding the year of the prospectus for the company and all of its subsidiaries. (9) The details of acts of material frauds committed against the company in the last five years, if any, and if so, the action taken by the company. (10) A fact sheet shall be included at the beginning of the prospectus which shall contain - (a) the type of offer document (Red Herring Prospectus or Shelf Prospectus or "Prospectus"). (b) the name of the issuer company, date and place of its incorporation, its logo, address of its registered office, its telephone number, fax number, details of contact person, website address, e-mail address; (c) the names of the promoters of the issuer company; (d) the nature, number, price and amount of securities offered and issue size, as may be applicable; (e) the aggregate amount proposed to be raised through all the stages of offers of specified securities made through the shelf prospectus; (f) the name, logo and address of the registrar to the issue, along with its telephone number, fax number, website address and e-mail address; (g) the issue schedule - (i) date of opening of the issue; (ii) date of closing of the issue; (iii) date of earliest closing of the issue, if any. (h) the credit rating, if applicable; (i) all the grades obtained for the initial public offer; (j) the name(s) of the recognised stock exchanges where the securities are proposed to be listed; (k) the details about eligible investors; (l) coupon rate, coupon payment frequency, redemption date, redemption amount and details of debenture trustee in case of debt securities. In case of companies which have not completed five years, it shall be sufficient compliance for a company which has not completed five years, if such company provides such particulars or information for all the previous years since its incorporation. Sub-section(2) of Section 26 provides that nothing aforesaid (i.e. provisions of section 26(1)) shall apply under following circumstances: (a) Where a prospectus or form of application relating to shares in or debentures of the company is issued to existing members or debenture-holders of a company, whether an applicant has a right to renounce the shares or not under section 62 sub-section (1) clause (a) sub-clause (ii) in favour of any other person; or; (b) Where the issue of a prospectus or form of application relating to shares or debentures which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange.Statement by Experts A prospectus issued by public company shall not include a statement purporting to be made by an expert, unless the expert is a person who is not and has not been, engaged or interested in the formation or promotion or management, of the company. Such statement shall be included only when such expert has given his written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to the Registrar for registration. A statement to that effect shall be included in the prospectus. Dating & Signing and Registration of Prospectus According to Section 26(1) of the Act, every prospectus issued by or on behalf of a public company either with reference to its formation or subsequently, or by or on behalf of any person who is or has been engaged or interested in the formation of a public company, shall be dated and signed. The date indicated in the prospectus shall be deemed to be the date of its publication. The prospectus shall be signed by every person who is named therein as a director or proposed director of the Company or by his duly authorised attorney. Prospectus shall be issued by or on behalf of a company or in relation to an intended company only when it has been delivered to the Registrar for Registration a copy of signed prospectus on or before the date of its publication. The Registrar shall not register a prospectus unless the requirements with respect to its registration are complied with and the prospectus is accompanied by the consent in writing of all the persons named in the prospectus. Prospectus is to be issued within ninety days from the date of delivery of prospectus to the Registrar. No prospectus shall be valid if it is issued more than ninety days after the date on which a copy thereof is delivered to the Registrar.5 SHELF PROSPECTUS Shelf Prospectus means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus. In simple terms Shelf Prospectus is a single prospectus for multiple public. Issuer is permitted to offer and sell securities to the public without a separate prospectus for each act of offering for a certain period. Under the Act any class or classes of companies, as the Securities and Exchange Board (SEBI) may provide by regulations in this behalf, may file a shelf prospectus with the Registrar. Such prospectus is to be submitted at the stage of the first offer of securities which shall indicate a period not exceeding one year as the period of validity of such prospectus. The validity period shall commence from the date of opening of the first offer of securities under that prospectus, and in respect of a second or subsequent offer of such securities issued during the period of validity of that prospectus, no further prospectus is required. An information memorandum is required to be filed by a company filing a shelf prospectus which shall contain all material facts relating to new charges created, changes in the financial position of the company as have occurred between the first offer of securities or the previous offer of securities and the succeeding offer of securities, and such other changes as may be prescribed, with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus. According to the rules the information memorandum shall be prepared in Form PAS-2 and filed with the Registrar along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within one month prior to the issue of a second or subsequent offer of securities under the shelf prospectus. The section also provides a benefitting provision for the investors, the proviso provides that where a company or any other person has received applications for the allotment of securities along with advance payments of subscription before the making of any such change, the company or other person shall intimate the changes to such applicants and if they express a desire to withdraw their application, the company, or other person shall refund all the monies received as subscription within fifteen days thereof. Form PAS-2 significantly provides for following information to be disclosed: 1. Change in financial position of the company 2. Changes in the Share Capital, i.e. Capitalization Statement 3. Changes in accounting policies 4. Change in the risk factors as stated in the Shelf Prospectus and in the information memorandum filed with respect to previous offer) 5. Economic changes that may affect income from continuing operations 6. Any significant changes in the activities of the company, which may have a material effect on the profit/loss of the company, including the loss of agencies or markets and similar factors 7. Changes in the total turnover of each major industry segment in which the issuer operates 8. Any significant legal proceedings initiated by the company or against the company or its directors, the outcome of which could have an adverse impact on the company 9. Any significant claim made by any person or any authority against the company 10. Any significant change in the business environment of the company whether technological, financial, market related, government policy or otherwise, adversely affecting, in present or in future, the business of the company 11. Any significant change in the management or ownership of the company 12. Any other change which may reasonably influence the investment decision of an investor 13. Gist of details of Proposed objects with reference to the current offering including project plan, financial details, time period of meeting the objects and other relevant factors. 14. Date wise details of charges created on the assets / properties of the company since first offer or previous offer of securitiesa. Date of creation of charge b. Purpose for which charge has been created c. Amount for which charge has been created d. Period of charge e. Details of assets / property on which charge has been created f. Name of the charge holder g. Brief terms and conditions of the charge. Where an information memorandum is filed, every time an offer of securities is made such memorandum together with the shelf prospectus shall be deemed to be a prospectus. 6 RED HERRING PROSPECTUS Red herring Prospectus means a prospectus which does not include complete particulars of the quantum or price of the securities included therein. In simple terms a red herring prospectus contains most of the information pertaining to the companys operations and prospects, but does not include key details of the issue such as its price and the number of shares offered. According to section 32 a company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus. Such company proposing to issue a red herring prospectus shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer. A red herring prospectus shall carry the same obligations as are applicable to a prospectus and any variation between the red herring prospectus and a prospectus shall be highlighted as variations in the prospectus. Upon the closing of the offer of securities under this section, the prospectus stating therein the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details as are not included in the red herring prospectus shall be filed with the Registrar and the Securities and Exchange Board. 7 ABRIDGED PROSPECTUS According to section 2(1) of the Act abridged prospectus means a memorandum containing such salient features of a prospectus as may be specified by the Securities and Exchange Board by making regulations in this behalf.Section 33 of the Act provides that no form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an abridged prospectus. A copy of the prospectus shall, on a request being made by any person before the closing of the subscription list and the offer, be furnished to him. Nothing aforesaid shall apply if it is shown that the form of application was issued (a) in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to such securities; or (b) in relation to securities which were not offered to the public. The penal provisions provide that a company which makes any default in complying with the provisions shall be liable to a penalty of fifty thousand rupees for each default.