MISSTATEMENT IN PROSPECTUS

PROSPECTUS [Section 2 (70)]

Means any document described or issued as a prospectus and includes a
red herring prospectus referred to in section 32 or shelf prospectus referred
to in section 31 or any notice, circular, advertisement or other document
inviting offers from the public for the subscription or purchase of any
securities of a body corporate.

ADVERTISEMENT OF PROSPECTUS [Section 30]

Content of Advertisement
a. the contents of its memorandum as regards the objects, the liability of
members and the amount of share capital of the company, and
b. the names of the signatories to the memorandum and the number of
shares subscribed for by them, and
c. its capital structure.
ABRIDEGED PROSPECTUS [SECTION 2(1)]
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.
It shall accompany Application Form (Sec 33)
No application form for shares in or debentures of a company can be issued
unless it is accompanied by an abridged prospectus containing all the
prescribed features.

Exceptions
1 Where the form of application is issued to person who is bona fide invited
to enter into an underwriting agreement.
2 Where form of application is issued in relation to shares or debentures
which were not offered to the public.
3 Where the application is issued to existing members or debenture holders
of the company whether with or without the right of renunciation.
4 Where the application is issued in relation to shares or debentures which
are:(i) Uniform in all respects with shares or debentures previously issued, and
(ii) Dealt in or quoted at a recognized stock exchange.

SHELF PROSPECTUS [Section 31]

Why Shelf Prospectus

A public company is required to issue a prospectus for raising finance

from the public.

Every time a fresh issue of securities is made, issuing a fresh

prospectus is a costly and time consuming process.

In order to minimize such burden, the concept of 'shelf prospectus' is

introduced which will be valid for a period of one year.

Document required along with Shelf Prospectus

For any subsequent offering within the validity period only an 'information
memorandum' for updating the information under the specified heads is
required to be filed.

Meaning of Shelf Prospectus

Any class or classes of companies as prescribed by the Securities and
Exchange Board of India may file a shelf prospectus with the registrar of
companies at the stage of the first offer of securities for a period of one
year.
Benefit of Filing Shelf Prospectus

A company filing a shelf prospectus with the Registrar shall not be

required to issue prospectus afresh at every stage of offer of securities
by it within a period of validity of such shelf prospectus.

Thus at the time of making any subsequent offer, company shall-

File an updated Information memorandum

Issue to the public, updated information memorandum along with

shelf prospectus

Information Memorandum shall contain material facts which pertains

to

Creation of New Charge; and

Changes in Financial position of company which has occurred

between the first offer of security, previous offer of security and the
succeeding offer of security.

RED HERRING PROSPECTUS [SECTION 32]

Meaning of Red herring Prospectus

"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.

Provisions regarding Red Herring Prospectus

1 Any variation between the red-herring Prospectus and prospectus shall be
Highlighted as variations by the issuing company.
2 The applicant can exercise his right to withdraw from the application on
any intimation of variation within seven days from the date of such
intimation
3 According to section 32 of the Companies Act, 2013, red herring
prospectus may be issued by a company prior to the issue of a prospectus
and shall be filed with the registrar at least 3 days prior to the opening of
the subscription list and the offer.
When the Final Prospectus shall be filled
Upon the closing of the offer of securities, a final prospectus shall be filed

In a case of a listed public company with the SEBI and ROC; and

In any other case with the ROC only.

Final Prospectus shall contain

Upon closing of the offer of securities, the details of information which are
not included in the red herring prospectus is to be filed with the registrar
and the SEBI.

DEEMED PROSPECTUS OR PROSPECTUS BY IMPLICATION OR OFFER

FOR SALE [SECTION 25]

Where the company allots or agrees to allot any shares or debentures

to any issuing house or others

With a view that such shares or Debentures would be offered to

public for sale

Any such document by which this offer for sale to public is made

shall be deemed to be a prospectus issued by a company and

All provisions applicable to prospectus shall be applicable to it with

specified modification.

Presumption with Deemed Prospectus

It will be presumed that an allotment or an agreement to allot shares or
debentures to the issuing houses was made with a view to offer them to
public in case:(a) Shares were offered to the public for sale within 6 months after they
were allotted or agreed to be allotted to issuing house, or
(b) Whole consideration in respect of shares/debentures had not been
received by the company.
Matters to be Stated in Deemed Prospectus Contents of prospectus

Liability in respect of mis -statements, in and omissions from

prospectus, or otherwise relating to prospectus,

shall apply with the modifications

CRIMINAL LIABILITY FOR MIS STATEMENT [Section 34]

Liability According to Sections 34 of the Companies Act, 2013, where any
prospectus is issued or circulated or distributed containing any statement

which is untrue or misleading in form in which it is included, then every

person who authorizes the issue of such prospectus shall be liable for
fraud. Defence available He can escape his liability under this section if he
can prove that:(a) Statement was immaterial; or
(b) He had reasonable ground to believe the statement to be true.

CIVIL LIABILITY FOR MIS STATEMENT [Section 35]

Liability Where any person subscribes for securities on the basis of
misleading statements or inclusion or omission of any matter in the
prospectus resulting in any loss or damages, then the company and every
person who has authorized the issue of such prospectus or a director,
promoter and the other, whosoever is liable- shall have to compensate every
person who has sustained such loss or damage. Defence available No
person shall be liable, if he proves that
(a) having consented to become a director of the company, he withdrew his
consent before the issue of the prospectus, and that it was issued without
his authority or consent; or
b) the prospectus was issued without his knowledge or consent, and that
on becoming aware of its issue, he forthwith gave a reasonable public notice
that it was issued without his knowledge or consent.