Amity Law School, Noida: Shelf Prospectus and Red Herring Prospectus

AMITY LAW SCHOOL, NOIDA
SHELF PROSPECTUS AND RED HERRING

PROSPECTUS
SUBMITTED TO SUBMITTED BY
Ms Shilpa Mehrotra Ms Aditi Sharma
A3221516251
Anutosh Sharma
A3221516277
BBA LLB (Sec-D)
Meaning of Prospectus of Company
“prospectus of company” means any document described or issued as a
prospectus and includes a red herring prospectus or shelf prospectus 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.
A prospectus of company may issue by or behalf of a public company. It can
issue either with reference to its formation or subsequently, or on behalf of
any person who has engaged or interested in the formation of a public
company.
Types of Prospectus
Shelf Prospectus
(1) Any class or classes of companies, as the Securities and Exchange Board
may provide by regulations in this behalf, may file a shelf prospectus with
the Registrar at the stage of the first offer of securities included therein
which shall indicate a period not exceeding one year as the period of validity
of such prospectus which 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.
(2) A company filing a shelf prospectus shall be required to file an
information memorandum containing 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:
Provided 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.
(3) Where an information memorandum then filed, every time an offer of
securities thus made under sub-section (2), such memorandum together with
the shelf prospectus shall deemed as 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.
Explanation. —For the purposes of this section, the expression “shelf prospectus”
means a prospectus in respect of which the securities or class of securities
included therein hence issued for subscription in one or more issues over a
certain period without the issue of a further prospectus.
Red Herring Prospectus
(1) A company proposing to make an offer of securities may issue a red

herring prospectus prior to the issue of a prospectus.
(2) A company proposing to issue a red herring prospectus under sub-section
(1) shall file it with the Registrar at least three days prior to the opening of
the subscription list and the offer.
(3) 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 thus have highlighted as variations in the
prospectus.
(4) 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
not included in the red herring prospectus shall then filed with the Registrar
and the Securities and Exchange Board.
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 company’s 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 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.
Explanation—For the purposes of this section, the expression “red herring

prospectus” means a prospectus which does not include complete particulars
of the quantum or price of the securities included therein.

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AMITY LAW SCHOOL, NOIDA

SHELF PROSPECTUS AND RED HERRING

Red Herring Prospectus

(1) A company proposing to make an offer of securities may issue a red

Explanation—For the purposes of this section, the expression “red herring

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