Types of Prospectus

  1. *Deemed Prospectus *- As per Section 25(1) of the Companies Act, 2013, a document will be deemed to be a prospectus if the company agrees to allot or offer securities to the public.
  2. Abridged Prospectus - It is defined as the brief summary of the prospectus, which includes all useful and materialistic information filed before the registrar. As per Section 33(1) of the Companies Act, 2013, an abridged prospectus must be included with the documents for the purchase of securities issued by a company.
  3. Red Herring Prospectus - It is the prospectus that is required to be filed before the registrar prior to the offer. The prospectus generally lacks information such as the particular price or quantum of securities being offered.
  4. Shelf Prospectus - It is defined as the prospectus issued by a company, bank or financial institution for more than one class of securities.

Understanding Prospectus

As per the Companies Act, 2013, a prospectus can include information such as advertisement, circular or notice among other legal documents inviting the public for the offering. Also, the prospectus should be issued only for the purchase of a company's securities.

In order for a document to be considered a prospectus, it should act as an invitation for the public to purchase of stocks/shares, debentures or other instruments. Also, the prospectus should be issued by the company or an institution on behalf of the company and made solely for the public.

In case a private company wishes to convert to a public company, it is required to either issue a prospectus or file a statement in lieu of prospectus of which the provisions are mentioned under Section 70 of the Companies Act, 2013.

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