A prospectus issued by or on behalf of a company or in relation to an intended company shall be dated, and that date shall, unless the

contrary is proved, be taken as the date of publication of the prospectus.

Every prospectus issued (a) by or on behalf of a company, or (b) by or on behalf of any person who is or has been engaged or interested in the formation of a company.
(1)

(2) A condition requiring or binding an applicant for shares in or debentures of a company to waive compliance with any of the requirements of this section, or purporting to affect him with notice for any contract, document or matter not specifically referred to in the prospectus, shall be void. (3) No one shall issue any form of application for shares in or debentures of a company, unless the form is accompanied 1[by a memorandum containing such salient features of a prospectus as may be prescribed] which complies with the requirements of this section:

(4) A director or other person responsible for the prospectus shall not incur any liability by reason of any non-compliance with, or contravention of, any of the requirements of this section, if (a) as regards any matter not disclosed, he proves that he had no knowledge thereof; or (b) he proves that the non-compliance or contravention arose from an honest mistake of fact on his part; or (c) the non-compliance or contravention was in respect of matters which, in the opinion of the Court dealing with the case 4 [were immaterial] or was otherwise such as ought, in the opinion of that Court, having regard to all the circumstances of the case, reasonably to be excused:

(5) This section shall not apply (a) to the issue to existing members or debenture-holders of a company of a prospectus or form of application relating to shares in or debentures of the company whether an applicant for shares or debentures will or will not have the right to renounce in favour of other persons; (b) to 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,

A prospectus inviting persons to subscribe for shares in or debentures of a 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 in the management, of the company.

A prospectus inviting persons to subscribe for shares in or debentures of a company and including a statement purporting to be made by an expert shall not be issued, unless (a) he has given his written consent to the issue thereof with the statement included in the form and context in which it is included, and has not withdrawn such consent before the delivery of a copy of the prospectus for registration; and (b) a statement that he has given and has not withdrawn his consent as aforesaid appears in the prospectus.

(1) Every company, which accepts deposits from small depositors, shall intimate to the (Tribunal) any default made by it in repayment of any such deposits or part thereof or any interest thereupon. (2) The intimation under sub-section(1) shall,(a) be given within sixty days from the date of default; (b)include particulars in respect of the names and addresses of each small depositor, the principal sum of deposits due to them and interest acc.rued thereupon.

(1) If any prospectus is issued in contravention of section 57 or 58, the company, and every person, who is knowingly a party to the issue thereof, shall be punishable with fine which may extend to five thousand rupees. (2) In section 57 and 58, the expression "expert" includes an engineer, a valuer, an accountant and any other person whose profession gives authority to a statement made by him.

(1) No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, there has been delivered to the Registrar for registration a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, and having endorsed thereon or attached thereto (a) any consent to the issue of the prospectus required by section 58 from any person as an expert; and (b) in the case of a prospectus issued generally, also (i) a copy of every contract required by clause 16 of Schedule II to be specified in the prospectus or in the case of a contract not reduced into writing, a memorandum giving full particulars thereof; and (ii) where the persons making any report required by Part II of that Schedule have made therein, or, have, without giving the reasons, indicated therein, any such adjustments as are mentioned in clause 32 of that Schedule, a written statement signed by those persons setting out the adjustments and giving the reasons therefore.

(1) Any public financial institution, public sector bank or scheduled bank whose main object is financing shall file a shelf prospectus. (2) A company filing a shelf prospectus with the Registrar shall not be required to file prospectus afresh at every stage of offer of securities by it within a period of validity of such shelf prospectus.

(1) A public company making an issue of securities may circulate information memorandum to the public prior to filing of a prospectus. (2) A company inviting subscription by an information memorandum shall be 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. (3) The information memorandum and red-herring prospectus shall carry same obligations as are applicable in the case of a prospectus. (4) Any variation between the information memorandum and the redherring prospectus shall be highlighted as variations by the issuing company. Explanation.- For the purposes of sub-sections (2), (3) and (4), "redherring prospectus" means a prospectus which does not have complete particulars on the price of the securities offered and the quantum of securities offered.

A company shall not, at any time, vary the terms of a contract referred to in the prospectus or statement in lieu of prospectus, except subject to the approval of, or except on authority given by, the company in general meeting.

1.

CIVIL LIABILITY FOR MISSTATEMENTS IN PROSPECTUS.

Person who is director of the company at time of issuing the prospectus. ii. Every person who is designated to be a director. iii. Promoter. iv. Everyone who has authorized the issue of the prospectus.
i.

2.

Person seizes to be liable if (not applicable to those under 58 and 60)

He/she was not the director at that point in time. the prospectus was issued without their consent and a public notice was issued of the same. iii. The error was detected after the prospectus was issued and he withdrew his consent. A public notice about this withdrawal is also issued.
i. ii.

Similar clauses for those under section 58 and 60. Sebi guidelines as to definition of promoter and promoter group
Meaning of promoter

x Person in control. x Person in charge of planning issuance of securities to public. x Named in the prospectus as promoters. Meaning of promoter group x Promoter. x Immediate family. x In case promoter is a company, all holding and subsidiary companies, companies in which the parent company has 10% equity or any company that has 10% equity in the company and all companies in which a certain group of people have a combined stake of 20%. x In case the promoter is an individual, all companies in which he/she or immediate family has 10% equity, all companies that have 10% equity in the companies mentioned, named in prospectus.

Rule not applicable to financial institutions in their normal course of business.

Criminal liability for misstatement in prospectus

Everyone who authorized issuance of the

prospectus. Punishment includes imprisonment for upto 2 years and a fine of upto Rs. 50,000 or both. Section not applicable if
x Proved that statement is immaterial. x If there was enough evidence at that time to believe that statement was true.

Under this section, a person who gives consent under sections 58 and 60 is not to be held as authority for issuance.

 Documents

containing offer of shares or debentures for sale to be deemed prospectus.

Any document by which the offer for sale of

shares or debentures of a company is made is deemed as a prospectus. All such documents need to conform with the requirements of a prospectus mentioned in Section 60.

1) For the purposes of the foregoing provisions of this Part (a) a statement included in a prospectus shall be deemed to be untrue, if the statement is misleading in the form and context in which it is included; and (b) where the omission from a prospectus of any matter is calculated to mislead the prospectus shall be deemed, in respect of such omission, to be a prospectus in which an untrue statement is included 2) For the purposes of sections 61, 62 and 63 and clause (a) of subsection (1) of this section, the expression included when used with reference to a prospectus, means included in the prospectus itself or contained in any report or memorandum appearing on the face thereof or by reference incorporated therein or issued therewith.

 Where

any prospectus is published as a newspaper advertisement, it shall not be necessary in the advertisement to specify the contents of the memorandum or the signatories thereto, or the number of shares subscribed for by them

1) Any reference in this Act or in the articles of a company to offering shares or debentures to the public shall, subject to any provision to the contrary contained in this Act and subject also to the provisions of sub-sections (3) and (4), be construed as including a reference to offering them to any section of the public, whether selected as members or debenture-holders of the company concerned or as clients of the person issuing the prospectus or in any other manner. (2) Any reference in this Act or in the articles of a company to invitations to the public to subscribe for shares or debentures shall, subject as aforesaid, be construed as including a reference to invitations to subscribe for them extended to any section of the public, whether selected as members or debenture-holders of the company concerned or as clients of the person issuing the prospectus or in any other manner.

3) No offer or invitation shall be treated as made to the public by virtue of sub-section (1) or sub-section (2), as the case may be, if the offer or invitation can properly be regarded, in all the circumstances (a) as not being calculated to result, directly or indirectly, in the shares or debentures becoming available for subscription or purchase by persons other than those receiving the offer or invitation; or (b) otherwise as being a domestic concern of the persons making and receiving the offer or invitation: 1[Provided that nothing contained in this sub-section shall apply in a case where the offer or invitation to subscribe for shares or debentures is made to fifty persons or more: Provided further that nothing contained in the first proviso shall apply to the non-banking financial companies or public financial institution specified in section 4A of the Companies Act, 1956.]

(3A) Not withstanding anything contained in sub-section (3), the Securities and Exchange Board of India shall, in consultation with the Reserve Bank of India, by notification in the Official Gazette, specify the guidelines in respect of offer or invitation made to the public by a public financial institution specified under section 4A or non-banking financial companys referred to in clause (f) of section 45-I of the Reserve Bank of India Act, 1934 (2 of 1934).] (4) Without prejudice to the generality of sub-section (3), a provision in a companys articles prohibiting invitations to the public to subscribe for shares or debentures shall not be taken as prohibiting the making to members or debentureholders of an invitation which can properly be regarded in the manner set forth in that sub-section. (5) The provisions of this Act relating to private companies shall be construed in accordance with the provisions contained in sub-sections (1) to (4).

Any person who either by knowingly or recklessly making any statement, promise or forecast which is false, deceptive or misleading or by any dishonest concealment of material facts, induces or attempts to induce another person to enter into, or to offer to enter into (a) any agreement for or with a view to acquiring, disposing of, subscribing for, or underwriting shares or debentures; or (b) any agreement the purpose or pretended purpose of which is to secure a profit to any of the parties from the yield of shares or debentures, or by reference to fluctuations in the value of shares or debentures, shall be punishable with imprisonment for a term which may extend to five years, or with fine which may extend to 1[one lakh rupees], or with both.

No allotment shall be made of any share capital of a company offered to the public for subscription, unless the amount in the prospectus as the minimum amount, which, in the opinion of the Board of directors, must be raised by the issue of share capital .This is amount referred to as minimum subscription The amount payable on application on each share shall not be less than five per cent of the nominal amount All moneys received from applicants for shares shall be deposited and kept deposited in a Scheduled Bank. If the conditions aforesaid have not been complied with on the expiry of one hundred and twenty days after the first issue of the prospectus, all moneys received from applicants for shares shall be forthwith repaid to them without interest; and if any such money is not so repaid within one hundred and thirty days after the issue of the prospectus, the directors, of the company shall be jointly and severally liable to repay that money with interest at the rate of six per cent per annum from the expiry of the one hundred and thirtieth day . Any condition purporting to require or bind any applicant for shares to waive compliance the any requirement of this section shall be void.

Any company which has not issued prospectus with its reference to its formation or which has issued such a prospectus but has not proceeded to allot any of its shares to public for subscription shall not allot any of its shares or debentures at least 3 days before 1st allotment of shares or debentures to registrar for registration a statement in lieu of prospectus signed by director or the proposed director of the company or by his agent authorised in writing. This clause doesnt apply to private companies. If a company and every director of the company who willfully authorizes or permits the contravention shall be punishable with fine up to Rs 1000/-. statement in lieu of prospectus delivered to the Registrar under sub-section (1) includes any untrue statement, any person who authorised the delivery of the statement in lieu of prospectus for registration shall be punishable with imprisonment for a term which may extend to two years or with fine which may extend to five thousand rupees or with both, unless he proves either that the statement was immaterial or he had reasonable grounds to believe that the statement was true.

An allotment made by a company to an applicant in contravention of the provisions of section 69 or 70 shall be voidable at the instance of the applicant -

(a) within two months after the holding of the statutory meeting of the company, and not later, or (b) in any case where the company is not required to hold a statutory meeting or where the allotment is made after the holding of the statutory meeting, within two months after the date of the allotment, and not later.

The allotment shall be voidable as aforesaid, notwithstanding that the company is in course of being wound up. If any director of a company knowingly contravenes, or willfully authorizes or permits the contravention of, any of the provisions of section 69 or 70 with respect of allotment, he shall be liable to compensate the company and the allotment respectively for any loss, damages or costs which the company or the allottee may have sustained or incurred thereby :

Only after 5 days of issuance of prospectus can the allotment of shares or debentures of company be made. This is referred to as time of opening of the subscription list. The prospectus must be issued as a NEWS paper advertisement. The validity of an allotment shall not be affected by any contravention of the foregoing provisions of this section but in the event of any such contravention, the company, and every officer of the company who is in default, shall be punishable with fine which may extend to five thousand rupees. An application for shares in, or debentures of, a company, which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the fifth day after the time of the opening of the subscription lists.

 Allotment

of shares and debentures to be dealt in on stock exchange.

1. Company needs to take permission from anyone of the

recognized stock exchange(s). 1(A). Provide name of exchange(s). Allotment made on an application will be void if permission is not granted. 2. Where the permission has not been granted all the money received from applicants should be repaid without interest. 2(A)&(B). When permission has been granted by stock exchange(s) and if more money is collected than stipulated in application than the extra amount needs to be repaid or it is punishable by law.

 3. All the money received should be kept in a

separate bank account maintained with the schedule bank. 3(A). Money in this account can be used for 2 purposes : adjustment against allotments and repayment of moneys received from applications. 4. Any shares or debentures allotted which doesnt meet all the requirements of this section will be void. 5. If application of permission is not completed within the time specified than it would be considered as permission not granted.

 6. This section shall effect: the person who is buying

the shares or debentures and the prospectus offering shares for sale. 7. No other stock exchange(s) will be stated in prospectus except recognized stock exchange(s)

 Manner

of reckoning fifth,eighth and tenth days in section 72 and section 73.

If there is a public holiday according to Negotiable

Instruments Act in 5 day or 8 day period other than 5th or 8th day in section 72 or 73 respectively than it will be disregarded. If 5th or the 8th day is the public holiday than the first day thereafter which is not a public holiday will be substituted.

 Return as allotments 1. Company making any allotment of its shares shall

within 30 days : x File with the registrar a return of the allotments. x In the case of shares allotted(not being bonus shares) all the consideration other than cash related to the allocation should be produce for the inspection and examination of the Registrar in writing(contract). x File with Registrar in 2 cases: in case of bonus share and in the case of issue of shares at discount. 2. When the contract mentioned in sub-section 1 in not reduced in writing the company needs to file with the Registrar prescribed particulars of the contract.

 3. If the Registrar is satisfied that in a particular case

the period of 30 days is inadequate than period can be extended by the Registrar as he thinks fit. 4. If default is made in complying with this section, than every officer of the company who is in default is punishable with fine.

 Power

to pay certain commissions and prohibition of payment of all other commissions, discounts, etc.
A company may pay a commission to any person

in consideration of :
x his subscribing or agreeing to subscribe, whether absolutely or conditionally for any shares in, or debentures of the company, or x his procuring or agreeing to procure subscriptions, whether absolute or conditional, for any shares in, or debentures of, the company

x if the following conditions are fulfilled, namely:

x the payment of the commission is authorised by the articles; x the commission paid or agreed to be paid does not exceed in the case of shares, five per cent of the price at which the shares are issued or the amount or rate authorised by the articles, whichever is less, and in the case of debentures, two and a half per cent of the price at which the debentures are issued or the amount or rate authorised by the articles, whichever is less. x the amount or rate per cent of the commission paid or agreed to be paid is
x in the case of shares or debentures offered to the public for subscription, disclosed in the prospectus; and

x in the case of shares or debentures not offered to the public for subscription, disclosed in the statement in lieu of prospectus, or in a statement in the prescribed form signed in like manner as a statement in lieu of prospectus and filed before the payment of the commission with the Registrar and, where a circular or notice, not being a prospectus inviting subscription for the shares or debentures, is issued, also disclosed in that circular or notice.

x the number of shares or debentures which persons have agreed for a commission to subscribe absolutely or conditionally is disclosed in the manner aforesaid. x a copy of the contract for the payment of, the commission is delivered to the Registrar at the time of delivery of the prospectus or the statement in lieu of prospectus for registration

 Where a company issues a securities a sum equal to aggregate amount or value of the premium should be transferred to an account called as the premium account.

A company cannot issue share at a discount except:

x The issue of the shares of discount is authorized by a resolution by the company in general meeting and sanctioned by the Central government. x The resolution specifies the maximum rate of discount at which the shares are issued. x Not less than 1 year at the date of the issue has elapsed since the date on which company was entitled to commence business. x The shares to be issued at a discount are issued within 2 months after the date on which the issue is sanctioned by the Central government or within such extended time as Central government may allow.

Redemption of shares issued by the company is only out of the profits of the company.