Prospectus
Also called: Offer document
Under Section 2(70) of the Companies Act, 2013, any document described or issued as a prospectus, including red herring and shelf prospectuses, or any notice, circular or advertisement inviting public offers for securities.
Explained
Section 2(70) of the Companies Act, 2013 defines prospectus as any document described or issued as a prospectus, and includes a red herring prospectus under Section 32, a shelf prospectus under Section 31, and any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate. The test is substance: any document that invites the public to subscribe or buy is a prospectus, whatever it is called. Section 25 adds that where a company allots securities with a view to their being offered for sale to the public, the document of offer for sale is deemed to be a prospectus issued by the company.
Section 26 lays down the contents and requires a copy to be delivered to the Registrar for registration. Under Section 26(8) no prospectus is valid if it is issued more than ninety days after the date on which a copy is delivered to the Registrar.
The Act recognises special forms. A shelf prospectus under Section 31 may be filed by notified classes of companies at the first offer of the securities included in it, and must indicate a period of validity not exceeding one year from the opening of the first offer. A red herring prospectus under Section 32 is issued before the prospectus, must be filed with the Registrar at least three days before the subscription list opens, and carries the same obligations as a prospectus. Section 33 requires every application form for securities to be accompanied by an abridged prospectus.
Misstatements attract two kinds of liability. Under Section 34, every person who authorises the issue of a prospectus containing an untrue or misleading statement is liable under Section 447 for fraud. Under Section 35, the company, directors, persons named as directors with their consent, promoters, persons authorising issue and experts must compensate subscribers who suffer loss, subject to defences such as withdrawal of consent before issue. The RERA, 2016 defines prospectus separately in Section 2(zl) for real estate offers. Examiners test the time limits, the forms of prospectus and the Section 35 defences.
What the law says
(70) “prospectus” 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;
Clause (70) defines prospectus
(1) Where a company allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis-statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply with the modifications specified in sub-sections (3) and (4) and shall have effect accordingly, as if the securities had been offered to the public for subscription and as if persons accepting the offer in respect of any securities were subscribers for those securities, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis-statements contained in the document or otherwise in respect thereof.
(2) For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, securities was made with a view to the securities being offered for sale to the public if it is shown—
(a) that an offer of the securities or of any of them for sale to the public was made within six months after the allotment or agreement to allot; or
Offer for sale document deemed a prospectus
(1) 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 and shall, [state such information and set out such reports on financial information as may be specified by the Securities and Exchange Board in consultation with the Central Government:
Provided that until the Securities and Exchange Board specifies the information and reports on financial information under this sub-section, the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992 (15 of 1992), in respect of such financial information or reports on financial information shall apply]; —
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Contents, registration and the 90-day validity rule
(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.
Shelf 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 be highlighted as variations in the prospectus.
Red herring prospectus
(1) Where a person has subscribed for securities of a company acting on any statement included, or the inclusion or omission of any matter, in the prospectus which is misleading and has sustained any loss or damage as a consequence thereof, the company and every person who—
(a) is a director of the company at the time of the issue of the prospectus;
(b) has authorised himself to be named and is named in the prospectus as a director of the company, or has agreed to become such director, either immediately or after an interval of time;
Civil liability for misstatements in a prospectus
Example
For example, a director who withdrew his consent before a prospectus was issued, and in whose name it was issued without authority, escapes civil liability under Section 35(2)(a) for misstatements in it.
For the exam
- Section 2(70): includes red herring and shelf prospectuses and any public invitation document.
- Section 25: an offer for sale document is a deemed prospectus.
- Section 26(8): invalid if issued more than 90 days after delivery to the Registrar.
- Shelf prospectus valid up to one year; red herring filed at least three days before opening.
- Section 34 criminal liability under Section 447; Section 35 civil liability to subscribers.
22 questions in the Law Maker question bank use this term. Practise Company Law questions
Related terms
- Public companyUnder Section 2(71) of the Companies Act, 2013, a company that is not a private company and has the prescribed minimum paid-up capital, including a subsidiary of a non private company.
- DebentureAn instrument of a company evidencing a debt, including debenture stock and bonds, whether or not it creates a charge on the company's assets. Section 2(30) of the Companies Act, 2013.
- Private companyA company whose articles restrict share transfer, limit members to two hundred (except a One Person Company) and bar public invitation to subscribe for its securities. Section 2(68), Companies Act, 2013.
- Independent directorA director, other than a managing, whole-time or nominee director, who meets the independence criteria in Section 149(6) of the Companies Act, 2013 (Section 2(47)).
- FraudUnder Section 17 of the Contract Act, specified acts by a party to a contract, or with his connivance, or by his agent, done to deceive the other party or induce him to contract.
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.