POWERS OF SEBI & PROSPECTUSAtul Khurana
Section 24, Power of Securities and Exchange Board to regulate issue and transfer of securities, etc
The provisions of this section specifically bring the Securities & Exchange Board of India (SEBI) into the big picture.
As per this section:
In case of listed companies and the companies which intend to get their securities listed on any recognized stock exchange in India, The matters related to
- Issue and transfer of securities and
- Non-payment of dividend,
Shall be administered by the Securities and Exchange Board (SEBI) by making regulations in this behalf.
For the removal of doubts, it is hereby declared that all powers relating to all other matters relating to prospectus, return of allotment, redemption of preference shares and any other matter specifically provided in this Act, shall be exercised by the Central Government, the Tribunal or the Registrar, as the case may be.
Section 25, Deemed Prospectus
Any document by which the offer for sale to the public is made for the allotment of any type of securities of the company, shall, for all purposes be deemed to be a prospectus issued by the company.
For the purpose of this act,
- If 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
- If at the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it.
Section 26 deals with the Matters to be stated in the prospectus but there are some matters which needs to be stated in deemed prospectus. So, a portion of section 26 forms the part of this section.
Along with the matters to be stated as per section 26, the following matters needs to be included in addition in the case of deemed prospectus:
- The net amount of the consideration received or to be received by the company in respect of the securities to which the offer relates; and
- The time and place at which the contract where under the said securities have been or are to be allotted may be inspected;
Section 26, Matters to be stated in the Prospectus
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 the following information, namely:—
|(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;|
|(ii)||dates of the opening and closing of the issue, and declaration about the issue of allotment letters and refunds within the prescribed time;|
|(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;|
|(iv)||details about underwriting of the issue;|
|(v)||consent of the directors, auditors, bankers to the issue, expert’s opinion, if any, and of such other persons, as may be prescribed;|
|(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;|
|(ix)||main objects of public offer, terms of the present issue and such other particulars 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 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;|
|(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; and|
|(xiv)||disclosures in such manner as may be prescribed about sources of promoter’s contribution;|
There are some reports which need to be set out for the purposes of the financial information, let us discuss:
- 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;
- 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
- 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 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 180 days before the issue of the prospectus
- Reports about the business or transaction to which the proceeds of the securities are to be applied directly or indirectly.
Some Important Points:
- Every prospectus issued shall, on the face of it,—
- State that a copy has been delivered for registration to the Registrar and
- Specify any documents required by this section to be attached to the copy so delivered or refer to statements included in the prospectus which specify these documents.
- The Registrar shall not register a prospectus unless the requirements of this section 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.
- 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.
If a prospectus is issued in contravention of the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.
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