~h~pte

.. , • • • •

Form Section No Purpose

PAS-1 27 Advt. providing details of notice of SR for varying terms of contracts
referred to in Prospectus or Objects for which Prospectus was issued
PAS- 2 31 Information Memorandum
PAS- 3 39 & 42 Return of allotment of securities
PAS-4 42 Private placements offer cum application letter
PAS- 5 42 Record of Private placement offers
PAS- 6 29 Unlisted Public company to file with RoC within 60 days of each half year

Sec No. Section Name

23 Public Offer and Private Placement
24 Power of Securities and Exchange Board to Regulate Issue and Transfer of
Securities, etc.
25 Document Containing Offer of Securities for Sale to be Deemed Prospectus
26 Matters to be Stated in Prospectus
27 Variation in Terms of Contract or Objects in Prospectus
28 Offer of Sale of Shares by Certain Members of Company
29 Public Offer of Securities to be in Dematerialised Form
30 Advertisement of Prospectus
31 Shelf Prospectus
32 Red Herring Prospectus
33 Issue of Application Forms for Securities
34 Criminal Liability for Misstatements in Prospectus
35 Civil Liability for Misstatements in Prospectus
36 Punishment for Fraudulently Inducing Persons to Invest Money
37 Action by Affected Persons
38 Punishment for Personation for Acquisition, etc., of Securities
39 Allotment of Securities by Company
40 Securities to be Dealt with in Stock Exchanges
41 Global Depository Receipt
42 Offer or Invitation for Subscription of Securities on Private Placement

3.1
Prospectus and Allotment of Securities .
~-
.,,--r.{el~•,r.=••@•a•w•u•;
:•;;1 ---------.----
-------------
This Chapter
P a rt I - Prov
is divided in
isions relatin
two p a rt s.
. . th ugh
_-4-1)--
P a rt I I - Pro g to issue o f se Public O ff e
visions relati curit_i~s ~o r (S e c 23
ng to issue o
t.ti. l'M#li·i:ii ■ M
f securi:ties h P ri v a te P la c
e m e n t { S e c 42

ti
t roug

l•@+Ml·IHWiiMaH
)
1. Public com
pany m
through prosp
ay issue secu
rities: tliW •
e .
to public (POctus Private Ri h t issue a
g. nd Bonus is su e r th is A c t
(and SE
) Placement f . t d co / e a s p .
in c a se o 1
is e
co. in te n d in g .
to g e t listed 81
· )
2. Private co
mpany may is
sue securitie
th, 01:19\, proS s:
\'ect1:1s Private
to p1:1blic
Placement Right issue a
nd Bonus is su
N o te - Public e a s p e r th is
o ff e r includes Act
IP O , FPO an
d OFS
3. Notified
class of pub
lic companie
exchanges in s can issue
pe rmis sib le fo se c u ri ti e s fo
reign jurisdic r th e p u rp o
tion . (Overse se o f li st ing
Im p ort a n t D as d ir e c t list on stoc~
efinitions: in g)
Secu ri ti e s [S
e c 2(81)] - A
S e c u ri ty is a s defined in S
wider te rm an ection 2(h) o
inve st m e n t sc d includes- sh f SCRA, 1956
heme, securi a re s, bonds , d .
ty re c e ip ts , u e b e n tu re s , d
nits o f mutual e ri v a ti v e s, u
fund, govern n it s o f co llec
N o te - S e c u ment s e c u ri tive
ri ty shall not ti e s , e tc.
include units
o f Unit Linked
Pro sp e c tu s [S In su ra n c e Po
ec 2(70)] - A licy (ULIP )
i. Red Herr ny document
ing Prospectu de
ii. S h e lf P s (RHP ) as p e scribed o r issued as a p ro
rospectus (SP r S e c 3 2 and sp e c tu s and
iii . Notice, c ) as p e r sec 31 includ e s :
ircular, advt.
of any se c u ri /o th e r doc in
ti e s o f BC. viting o ff e rs
from public fo
~ l r su b s cri p ti o
!. .. ~ ~ Section 24 n o r p u rc h a se
: Power o f S
SEBI is emp EBI -t o .'regu
owered to re lafe issue an
li st e d compan g ulate issue an d transfer o
ies o r compan d tr a n s fe r o f secur it ie s :·
ies intending f securities o
to g e t listed r non-p aymen
on Recognised t of div id e n
Section 2 5 - St ock Ex chan d b
Document C g e (RSE) in I
ontaining O ff d' y
~ r o f Securi n IQ
Company ti es fo r S ale to be Dee
.

Is s ue House Document= m ed Prospectus

Dee me d Prosp Pub\ic a t larg
ectus e
Meaning _ W
h e re a compan
view th a t th o y (A) allots o
s e se c u ri ti e s r ag re e s t o al
sa le to t he p sh all b e g ff e re lo t any securi
ublic is made d fo r sale t o ti e s of th e co
shall, fo r all public , any do ~pany (A) wit
purposes , be cument by whi h
deemed to be ch th e o ff e r 0
a prospectus . fo r-
3 .2

. P ro s p e c tu s
and Allotme i in
 Effect of deeming provision-
!. Law relating to content of prospectus and liabilities u/s 34,35 shall apply
2. Person making offer were person named as director in the company

Presumptions: Unless the contrary is proved, it shall be evidence that an allotment of securities was
made with a view to the securities being offered for sale to the public if it is shown:
a. that offer for sale to the public was made within 6m after the allotment or agreement to allot; or
b. that at the date when offer was made, whole consideration had not been received by the co.

In addition to matter stated u/s 26, following additional matter is to be included in the document:
a. Net amt. of consideration received/to be received by the company
b. time and place at which contract for allotment of said securities may be inspected
c. the person making the offer were named in prospectus as the di rect ors of the company.

Signature of document (deemed prospectus):

In case of company - 2 directors; In case of Partners - At least½ of Partners

SEBI v Kunnamkulam Paper Mills Ltd:

Where a right s issue is made to existing members with a right to renounce in favour of others, if
the number of such others exceeds 50, it also becomes a deemed prospectus.

Section 26 - Matters to .be St_a_te_dj n~~':'?fP.~f.!9.,~-5· ·

1. Every prospectus issued by/on behalf of public company shall be dated and signed.

Prospectus shall state information and set out such reports on financial information as specified
by SEBI + CG. Unless specified by SEBI, the regulations already made by SEBI shall apply.

Prospectus to include:
a. declaration about compliance with this Act, and
b. statement that nothing in prospectus is contrary to this Act, SEBI and SCRA.

2. Nothing u/ss (1) shall apply to the issue of prospectus/form of application for:
a. Issue of shares or debentures to existing members or DH, whether or not there is right to
renounce u/s 62(1)
b. Issue of shares or debentures which are uniform with shares or debentures previously
issued and are currently quoted on RSE.

3. Provision of 26(1) shall apply to prospectus or form of application issued on formation of company
or subsequently.
Explanation - Date indicated in prospectus shall be deemed to be the date of publication.

. ' 3.3
Prospectus and Allotment of ·S~curities · . . :.,•:. .
. )
 ...- -- -- -, ~ -- -- -- -- -- -- -- -- :- -;
,.. ;~ ~ -= = d ~ u :n
4. Fi \e prospec ~ le ~ s ;s ~ o ;n
tus with RoC: N t s ~ o ;r ~ b b
copy thereof ha o p ro spec u shall . be ,ssue E e ;f ~ o'r~ e ~ i~ t; s ;p u ;b ~ li
s been de livered . db . c M ·, ,.
► every per to RoC for filin \oil ..,1
son who is nam · g, Signe Y· s
► by his du
ed t herem as a d' ector or propo d d ir e c to r o f th e co
ly authorised at ,r e mpany
torney . or
5. Prospectus
sha\ not inc\ud
► expert is a lper e a statement p .
urporting to be ode by e x p e rt , unless:
son who is not m .
engaged/intere
► has given hi
s written conse sted in formatio / f n/mgt of
n t to • f h n promo ' 0
e prospe ctus and has not wit ·hdraco., nd
consent before th e issue o t . 0
filing of such p
rospectus wit· h R c d st a te wn su
inc\uded in th e
prospectus. o an a m e n t t o t ha t ff
Read definition e e c t shall
of Expe rt - Sec
2(38) [Chapter
1)
6. Every prosp
ectus shall, on t
(a) st a te th at he face of it,:
a copy has been
(b) sp e ci fy docs delivered to RoC
attached to th e u/ss (4); and
copy so delivered
8. Prosp ectus
not valid if issu
ed m_qr~thati 9Q
days a ft e r date
9. I ssue of pro of delivery o f
spectus in contr copy th e reof to
avention of this RoC
a party - Rs. 50 section - Compa
,000 to Rs. 3 la ny and every per
khs son who is know
L~ S
ection 2 7 - V
ari~ ti~n in Terms
ingly
Company shall no o f Contract or
t vary th e term Objects in Pro
th e prospectus s of a contract spectus
was issued, exce referred to in th
a. Prior approv pt with: e prospectus or o
al by way of sp b je c ts fo r which
b. prescribed ec ial resolution in G
details of such M and :
, published in resolution shall
newspapers (Eng be :
situated) and lish + vernacular
which is in circ
, placed on th ulation a t place
e website of th wher e RO is
indicating th e ju e company, if an
stification for su y,
c. Amt so rais ch ch ange ;
ed cannot be us
d. th e dissenti ed for buying, tr
ng shareholder ading or otherw
shareholders in s shall be give ise dealing in Eq.
accordance with n an exit offer shares of listed
regulations to be by the promote cos.
specified by the rs and control
SEBI. ling
~ Rule 7 of The Compcinies (Prospectu
1. SR u/s 27 sh s and Allotment
all be passed th .of Securities) R
rough Postal Bal ules , 2014:
information: lot. Notice of pr
oposed SR t o co
Original purpose ntain fo llo wing
/ total money
object money utilised fo
raised r extent(%) of ac
stated objects hievement of
unuti\ised proposed obj.
particulars of th reason and justif
amount e ication risk fa
proposed variat fo r variation ctors pertainin
ion g to
proposed ti me the new object
limit wit hi n whi s
ch t he pr opo sed
would be achi ev varied objects
ed other relevant in
fo
3.4
. Prospec~us an
d Allotment of
•Securities .
 2. Advertisement of notice - Form PAS-1 (published simultaneously with dispatch of notice)
3. Place notice on website of company
4. The dissenting shareholders shall be given an exit offer by the promoters and controlling
shareholders in accordance with regulations to be specified by the SEBI. (repeated in rule)

~AAuthorise
Section 28 - Offer of Sale of Shares by Certain Members of Company
1. the company
► Where certain members (indv./BC) of a company propose in consultation with BoD
► To offer whole/part of their holding to public
► the members shall then collectively authori ze the co. to take necessary action for OFS and
► then they shall reimburse the company of all expense incurred.

2. Document by which such OFS is made to public shall be deemed to be a prospectus issued by
the company and all provisions related to content and mis-statement shall apply.

~ Rule 8: Exception to certain matters

The following provision of this chapter shall not be applicable in case of OFS:
a. the provisions relating to minimum subscription;
b. the provisions for minimum application value;
c. the provisions requi ring any statement to be made by BoD in respect of utilization of money; and
d. any other provision/ information which cannot be compiled or gathered by the offeror, wit h
detailed justifications for not being able to comply with such provisions.

Note: Prospectus t o disclose name of the person(s)/entity bearing cost of making the OFS + reasons.

~Ai441Mrf !+@bl•tliil·~ ~l!D tm~4·1"11M%:Mii·iln•f

1

1. Notwithstanding anything contained in any other provisions of this Act:

a. every company making public offer; and
b. such other class or classes of public companies as may be prescribed,
shall issue the securities only in dematerialised form by complying with the provisions of the
Depositories Act, 1996 and the regulations made thereunder.

~ Rule 9 of Companies (Prospectus and Allotment of Securities) Rules, 2014:

The promoters of every public company making a public offer of any convertible securities may
hold such securities only in demat form.

Provided that the entire holdin_g of convertible securities of the company by promoters held in
physical form (up to the date of IPO) shall be converted into demat form before such offer is
made.

Example - Vijay Shekhar sharma OFS in Paytm - Has to be in demat form first

3.5
 2. In case of pres
cribed class of un 11· t d ompanies t he secu ·t ·e s shall be held or tr
only in Demat form s~ ~ . ' . s Act r1 I and an sf er r
in manner \aid down 1996 re h
gulations t ereund
in Depositorie er.
'
~ i®MAiii't:1·11-n,·1
1. Every UPC sha\\:
wWt1lilfw:w11r:m,1·¥,e·in ,tif¥@·i·ifl·@+mi+in!1NH1
a. Is su e securitie
s in demat form, an
b. Fac1l1tate demat d
erialisation of a\\ ex
as per th e Deposito isting sec.
ry Act, 1996 and re
gulations made th er eu nd er .
2. For UPC intendin
g to make of fe r fo
r:
issue of securities
buyback issue of bonus sh ar
es ri gh t sh ar es
shall ensure th at , be
fore making such of
fe r, en ti re holding
promoter of se cu ri ti es of:
directors KMPs
has been demateria
lized as per th e Depository
Act, 1996 and regu
lations made thereu
3. On or af te r 2nd Oct nder
ober 2018, every ho
a. who intends to lder of securities of
tr an sf er such secur1 UPC:
tr an sf er t1es , shall ge t such
securities de m at er
ia li se d before
b. who subscribe to
any sec. of UPC - En
sure existing securi
ties ar e held in de
4. Every UPC shall: m at form.
a. Facilitate demat
erialisation of exis
Depository (as defin ting securities by
ed u/s 2(1)(e) of th making necessary
e Depository Act), application to
b. Secure Internat and
ional security Identif
c. Inform existing ication Number (I S
security holder abou IN ) for each ty pe of
t such facility. se cu ri ti es ,
5. Every UPC shall ensu
re:
a. Timely paymen
t of fees to Depos
(DRS) as per th e re itory, Registrar to
spective agreement Issue & Share T ra
b. It maintains secu ns fe r Agent
rity deposit of >=2 ye
c. Complies with re ars of fees with DR
gulations of SEBI or S as per agreemen
Depository w.r.t, de t
materialisation of sh
6. No UPC which has de ar es
faulted in above pa
or buyback or bonu yment, shall make of
s/right issue till paym fe r of issue of any
ent to DRS has been se cu ri ti es
made.
7. Provision of Depos
itories Act, SEBI (D
SEBI (RTI and STA epositories and Parti
) Regulations, 1993 cipants) Regulations
- Apply Mutatis Mut , 2018 and
andis

3.6
 8. Every UPC shall submit Form PAS-6 + Fees with ROC within 60 days of conclusion of each
half year (FY). Such form shall be certified by a CA/CS/GNrA in practice

BA. Any diff. b/w issued capital and capital in demat form - Co to bring to notice of Depository

9. Grievances of securities holders of UPC - File with I EPF Authority. IEPF authority shall
initiate action against DRS after consultation with SEBI

10. This rule shall N.A. to an UPC which is - Nidhi company, Government company or a Wholly
owned subsidiary of a Government company.

3. Any company, other than above, may convert its securit ies into demat formor issue its securities
in physical form as per provisions of this Act or Depositories Act, 1996 and regulations.

Section 30 - Advertisement of Prospectus

Where an advertisement of prospectus of a company is publ ished in any manner, it is necessary t o
specify t herein t he contents of MoA as regards to:
Amount of SC names of the No. of shares Capit al
Objects Liability
of Co. {ASC) signatories subscribed by them Struct ure

Section 31 - Shelf Prosp~ct~s:·c~e)...: -

Meaning
► SP means a prospectus in respect of which
► the securities or class of securit ies included therein
► are issued for subscription in one or more issues over a certain period
► without the issue of a further prospectus.

Provision:
► Any class(es) of cos., as t he SEBI may provide by regulations in this behalf, may file SP with RoC
► at the stage of the first offer of securit ies included therein
► which shall indicate the period of validity of such prospectus, not exceeding 1 year
, validity shall commence from date of opening of first offer of securities under that prospectus,
, w.r.t., second/subsequent offer of such securities issued, no further prospectus is required.

Information Memorandum (IM): (Form PAS-2)

, Within 1 month prior to second/subsequent offer., company to file IM with RoC
► IM to contain material facts relating to:

New charges Changes in financial position of company between Other changes as

created previous offer and subsequent offer prescribed

. ' ' 3.7

Prosp~ctus and Allotment of.· Se~urities
, · . . .
. .
.
.
 Intimation o f
► W h e re a coCm hanges:
. .
t o f se c u ri· r,e s a lo n g with advanc
pany has rece th e a ll o tm e n
payments o f su ived applicati
bscription b e fo o n s fo r t
► Company to re making o f an
y such c h a n g
intimate such ~
► I f th e y changes to ap
d e si re to with plicant· . .
draw appli.cati.
on - Re f un d payment w.it h' 15 d a y s o f s u b s c ri p
Note: IM to g in ti o n
e th e r with sh
e lf prospectu
s shall b e dee
~A
med to b e p ro
sp e c tu s .
Meaning - Pro
included th e re
spectus which
does not inclu
de complete p ~ .
in . a rt ic u la rs Of u a n tu m /p ri c e o f
q se c u ri ti e s
1. Company p
roposing to m
2. RHP to b e ake an o ff e r o
filed with RoC f se c u ri ti e s m
a t le ay issue a RH
3. RHP to hav a st 3 days prior to P p ri o r to p ro
e same obligat opening o f su s p e c tu s
Variation b /w ion as prospe b sc ri p ti o n li st
RHP and prosp ctus. a n d th e o ff e
4. Upon closi ectus to b e hig r
ng o f o ff e r - hlighted as va
Prospectus (n riation in p ro
price and any ot RHP) st a ti n s p e c tu s
o th e r details g th e re in th e to ta
a s a re not incl l c a p it a l ra is
uded in RHP sh e d a n d closin
all b e filed w g
Read section ith th e RoC a
2(1) - Ab ridge n d th e SEBI.
d prosp e ct us.
~ A Section 3 3 -
Is su e -_~f .~pp
li~at~or( Form
1. Every form o s for Securit
f application fo ies
an abridged p
rospect us .
r p u rchase o f any
se c u ri ti e s o f
1Qr
a company sh
all b e a c c o m
p a n ie d by
This sub-secti
on shall not ap
with: ply if it is show
n th a t th e form
o f application
a. a bona fi
de invitation to was is su e d in
c o n n e c ti o n
b. in relation a person to e n
to se c u ri ti e s te r into an under
c. where o ff which were no writing a g re e
t o ff e re d to th m e n t w .r .t . su
e r is made to e public (Exam c h se c .; o r
existing mem ple - P ri v a te
bers o f th e co p la c e m e n t)
mpany
2. Copy o f th
e p ro sp e c tu s
subscription li shall, on a re q
st and th e o ff u e st being mad
e r, b e furnish e by any perso
ed to him. n b e fo re th e
closing o f th
3. Default in e
th is section -
Company liable
fo r Rs. 5 0 ,0 0
0 fo r each d e
fa u lt

3.8
 Section 34 and Section 35 - Liability for Misstatement
•.

Section 34 - Criminal Liability Section 35 - Civil Liability

If prospectus includes ~ plicability:
any statement - untrue or ► Where a person has subscribed for securities of a co +
misleading, every person who ► Acting on any statement included/omitted in prospectus
authorizes t he issue of such which is misleading, and
prospectus shall be liable under ► has sustained loss or damage as a consequence t hereof
section 447.
Person Liable: Company and every person who is:
Section N.A. if a person proves 1. Director at t he t ime of issue of prospect us or aut horized
t hat: himself to be named as di rector
a. such st atement/omission 2. Agreed to become director in future
was immaterial or 3. Promot or of company
b. that he had RGTB that 4. Authorized the issue of prospectus
statement was true or the 5. Expert u/ s 26(5)
inclusion or omission was
necessary. Above person shall be liable to pay compensati on to every person
who has sustained such loss or damage.

No person shall be liable if he proves that:

a. Having consent to become director, withdrew the consent
and prospectus was issued w/o consent.
b. Prospectus issued w/o knowledge or consent + on becoming
aware gave reasonable public notice
C. Such statement was made on basis of expert's report + such
statement was true and fair representation of expert's
statement+ such person had RGTB that expert is competent
+ expert has given consent + not withdrawn consent.

If proven that prospectus issued with intent to defraud - every

person u/ss (1) shall be personally responsible - without any
limitation of liability
Note: A contract of shares in a company is a contract of Uberrimae fides (Latin), which means
'utmost good faith'. The legal doctrine of Uberrimae fides provides that all parties to contract must
deal in good faith , making a full declaration of all material facts. The intending purchasers of shares
are entitled to true and correct disclosures of all the facts in the prospectus.

1Qr Peek Vs. Gurney (not covered in ICAI material but was included in past paper question)
The remedy u/s 35 by way of damage will not be available to a person if he has not purchased the
shares on the basis of prospectus. (for example, a person bought shares from open market, in such
case it can't be said that he relied on the information of prospectus and hence, no remedy available)
I

3.9
Prospectus and Allotment of Securities ~
 Retnedies fo r tnisre .
presentation in Pr os pe ct us un de r In di an C on tr ac t A ct :
_
R . h -
1 ts R·~~c·~s1~io~n~o~f~c~o~nt~r~ Dama es
1 ~~~~~~~
When to seek? __
W he re a perse! •
on has su bs cr ib ed
a~c~
t c .: :; -
es Pe rs on ac te d on a
on basis of prospect to sh ar st at e
. • · Iea ding wh1c . h. f d I
us containing mis 1s ra u u en t and tnel'lt
st at em en t .
E ff ec t su st ai ne d da m a es
Contract to purcha
se sh ar es becomes
voidable at o tion of
Exception ur ch as er
► Right not av
ailable to subseque
nt
purchaser from mar
ket
► Su bs cr ib er to
MoA cannot se ek re
li ef .
Summary of Liabili
ty

Liability fo r Mist at
ement

Criminal Liability
Civil Liabilty
Every person who au
thoris ed fo r
issue of prospectus Company, di re ct or ,
pr oposed dire ct or
promoter, Ex pe rt . ,
one who au th or is ed
fo r issue of pr os pe
Punishable u/ s 44 7 ct us

Pay compensation to
Defenses In ve st or s

Defenses
Im m at er ia l r------r---
Necessary -
Wit hdrew its Believed on --i
consent to be a consent u/ s Is su ed without
director 26 (5 ) his knowledge,
Sec 44 7: Punish
ment fo r Fraud Public Notice
Without prejudice
to any liability inclu
in fo rc e, any person ding repayment of an
guilty of fraud shal y de
I Amount involved in l be liable as follows: bt under th is Act
- At least Low~e~r ~ or any ot he r law
th e fr au d off :~ - - -- I
a. Rs. 10 lakhs IL~e~s;;s-:+t:t:h=
an::-L-
;-ow_e_r- of- :- ~
W he th er public b. 1% of T /0 a. Rs. 10 lakhs
in te re st involved? No b. 1% of i/ O
Yes
Ja il No
And/or 6m - 10 ye ar s
______
,..._
__ .___
AND
U to 3x amt involv
~
3 ears
ed U to 3x amt in
volved U to Rs. 50
lakhs or both
 Fraud bole toh?:
Act Ommission Concealment of Fact I Abuse of position
Committed with:
Intent to decieve Gain undue advantage ( Injure interest. of co/SH/crs/others

whether or not there is a wrongful gain/loss.

~A Sec 36 : Punishment for Fraudulently Inducing Persons to Invest Money

Any person who:
► either knowingly/recklessly makes any statement, promise or forecast
► which is false , deceptive/misleading or
► del iberately conceals any material fact,
► t o induce another person t o enter into any agreement:

for Subscribing, the purpose of which is t o for obtaining credit

Acquiring, Disposing or secure a profit t o any of the facilit ies from any bank or
Underwriting securities parties from such securities financial institution
shall be liable for act ion u/ s 447.

~A Section 37: Action by Affected P~r~~ns,.~. ·· ·

A suit may be fil ed, or any other action may be taken u/s 34,35 or 36 by any person, group of
I persons or any association of persons affected by any misleading statement or the inclus ion or
omission of any matter in the prospectus.

Note - If Mr. M had purchased the shares based on statement in the prospectus, only Mr. M can
initiate a suit against the company and not Mr. X (to whom shares are transferred post allotment)

Ei II A @ioMilf means appropriation of previously un-appropriated capital of the company.

[Issue of Prospectus - Invitation to offer; Receiving Application - Offer; Allotment - Acceptance]

~ 'A Section 38 - Punishment for-.i>ers~~~£1~ &~£_qu.isition, etc., of Securities

1. A person shall be liable for punishment u/s 447 if:
a. He makes or abets the making of an application in a fictitious name to a company for acquiring,
or subscribing for, its securities; or
b. He makes or abets the making of multiple applications in different names or different
combinations of his name or surname for acquiring or subscribing for its securities; or
c. Otherwise induces, directly or indirectly a company to allot or register any transfer of any
securities to him or to any other person in a fictitious name.

2. The provisions u/ss (1) shall be prominently reproduced in every prospectus /form of application.
Note: A person who gets shares allotted in a fictitious name becomes liable as shareholder.

3.11
Prospectus and Allotment of Securities ·
 3. W h e re a p er . . d d th .
so n 1s conv1c te un e r is se ct io n , co u r t may o rd e r d is g o rg e m e n
him. T h e o rd e . d . t o f gain tn
4 . Amount re
r may also m clu e se iz · & d1sposa 1o f se c u ri ti e s fo u n d in . h'
ce iv ed th ro u g u re 1s p o ss es si o n adt,
h d is g o rg em en f s c u ri ti e s u
t o r d is p o sa I O /s (3) - C re d ·

~..
e it e d to !E p
N o te : T h e p u
rp o se o f th e se ~-
ct io n is to p re
v en t a IIo tm en t o f sh a re s in fi c ti ti o u s

1.
Section 3 9 :
Company can
a. amount st
b. sums payab
Allotment o f
Securitie·s by
a\lot sh a re to
a te d in p ro sp ec
le on applicatio
Company
public only whe
tu s as min. am
n have b ee n pa
n:
ount h as b ee n
•• .
n am es .

su b sc ri b e d a n d
id to and re ce iv
ed b y co. b y ch
2. Applicatio eq u e /o th e r in
n money sha\\ strument,
n o t b e le ss th
as may b e sp ec an 5% o f nominal
if ;e d by SEBI) am o u n t o f se
c u ri ti e s (o r o
th e r amount
3 . I f st a te d
minimum amou
3 0 d ay s o r su nt h as n o t b ee
ch o th e r perio n su b sc ri b ed an
d d application
R et u rn amoun as m ay b e specif;ed by money is n o t
t within p re sc S E B re ce iv ed within
ri b ed ti m e & m I fr o m d a te o f is su e o
anner. f p ro spectus -
~ ule 11 o f Cos (Prospec
R
a. I f minimum tu s and A\\otm
ent of_.Secu~it
am t n o t su b sc i~s' fRule~. ?O
Application m ri b ed + Applicati J. ,..:-_R ef ~ n d o
oney to b e re p on m oney n o t re ce f AppJr, Money
ai d w1thm 15_g iv ed within p :
g ~ fr o m close re sc ri b e d ti m e·
I f not repaid - o f issue.
Directors who
ar e OID - Join
tly & severally
b. R ef u n d sh liable to repay
all b e cr ed it ed with in tt . @15
only to th e bank % p.a.
account from w
4 . W h en a co hich th e su b sc
mpany makes ri p ti o n was re
any allotment m it ted .
(Form P A S -3 ) o f se cu ri ti es
- File with RoC
- R et u rn o f al
lotment
~ R u le 12 - R et u rn o f
Allotment:
a. R et u rn o f
al lo tm en t to b
b. Along wit e filed in Form
h th e R et u rn PAS - 3 within
occupation an o f allotment, 3 0 days o f allo
d no o f se cu ri at ta ch - list tment o f se cu
ti es al lo tt ed an o f al lo tt ee s st ri ti es .
In ca se o f is su d following docu at in g name, ad
e of: ments: d re ss ,
S ec u ri ti es (no A tt ac h to Form PAS
t being
bonus sh ar es ) ► A copy o f co n tr ac t duly -3:
al lo tt ed o f sale if rela st am p ed to g et h er with an
as fully o r p ar ting to a p ro p y co n tr a
tl y paid up fo r services o er ty o r an as se ct
fo r co n si d er at r o th er consid t, o r a co n tr a
io n o th e r er at ion. ct
th a n cash ► I f such above co n tr ac t is no
p ar ti cu la rs o f t re d u ced to writing
th e co n tr ac t st , comple
duty as would amped with th te
have been paya e sa me st am
re d u ce d to wri bl e if th e co n tr ac p
ting t had b een
A re p o rt o f
► re g is te re d va
consideration luer w.r.t. valuation o
to b e at ta ch ed f t he

3 .1 2
P ro sp e c tu s an
d Allotment o
f S
 Bonus securities Copy of resolution passed in GM authorizinq such issue
Shares u/s 62(1)(c) by Valuation report of registered valuer
co. othe r than listed - co.

1,000/day upto max Rs. 1 lakh (for

5. Default u/ss (3) and (4)- Company and its OID - Liable - Rs.
each default) for each default

✓Afiihii~Mri%·iildi l?l·i1~illGDiMl= l,HMJP ~~ ~

r- Company to make an application to one or more RSE{s) and obtain permission
1. Before Public Offe
for securities to be dealt with in such RSE.

- Also state the name{s) of RSE in

2. Where prospectus state s application u/ss {l) has been made
which the securities shall be dealt with.

nt in a scheduled bank + Not to be

3. Application money shall be kept in a separate bank accou
utilised for any purpose other than:
to be dealt with on RSE
a. Adjustment against allotment - If sec. have been permitted
is unable to allot securities
b. Repayment within the time specified by SEBI - If company

for securities to waive compliance with

4. Any condition purporting to require or bind any applicant
any of the requirements of this section shall be void.

5. Default in complying with this section:

Company OID
Minimum Rs. 51akhs Rs. 50,000
Rs.50 lakhs Rs.3 lakhs
Maximum

of securities subject to prescribed

6. Company may pay commission to any person for subscript ion
condition.
, 2014 - Payment' of Comm ission:
Rule 13 of Companies (Prospectus and Allotment of Sec) Rules
~Commission can be paid subjectrized
to following conditions:
by AOA
a. Such payments to be autho
of company, or both
b. Comm. may be paid out of (a) Proceeds of issue, or (b) Profit
c. Rate of comm
Commission shall NOT exceed
In case of sec. issue being:
Lower of:
a. 5% of price of share issue or
Shares
b. Rate auth by AO A
Lower of:
a. 2.5% of price at which debenture issued or
Debe ntures
b. Rate auth. by AoA

3.13
 d. ero~pectus
to d isc\ose:
name of no, of sec. underwritten or
underwriters ra te and amo unt of
commission pay
able to u/w
subsc. by u/w
No commission
e. to be paid If se
f. Copy of co curities a re no t 1·ss ue d to publi c.
ntract for pa=y~m f' le w h RoCa1 with p__rospec ,t.,...
~e~n_t _o_f _co_m
_m_ . -_ ,_ _it_ ong - t~J.Q!' r ~ 1, strg
ti
______
Concept c la r~ ______
check: _ _ _ _1
1. A Ltd. ap
plies in BSE an
reJe.
cted th e app\l . d dNSE f or Ob tai·nin · perm1.ss1.o r·,or to !P O .
All t he RSE wh
cat1on an BS E d su
g . n. P C A O f th e m , Nse
ap prove ch apphcat1on. L td. is s u e IPO
e re ap pli cation an ? - l~o.
2. Can under
writing commis
re s t ri ction in
h as
sion be paid in
bee n made has a:o
kind (say, in fo
pprove sue a~
h p lication
Yes th e r e ,s
\aw t ha t comm rms o f fl a ts ) no such
ission has to b '
~' L e paid only in
l.:.\1! • Section 41: cas~h:...- - -
G\oba\ Depos ------
A company may itory Receipt -~
, a ft e r passing (DR):
prescribed man a SR in its GM
ner. , issue deposi
in any fo re ig
tory re c e ip ts .
n coun t ry in.
~ Steps to issue DR (as p
1. BoD inten er Rule 4):
ding to issue D
2. Company R shall pass a
shall take prio resolutions au
r ap p ro v thorizing com
Note - SR passe al of SH by a pany to do so
d u/s 62 for is SR a t GM. . (BR)
3. DR shall sue of shares u
be issued by nderlying DR sh
underlying sha an overseas d all be deemed
res shall be ke e p o sitory bank (O SR fo r sectio
4. Comply wit pt in custody o D B) appointed b n 41.
h scheme and f domestic cu y th e comp
guidelines of R stodian bank. any and
5. Company BI in this rega
shall appoint m rd.
all compliance erchant banke
s w.r.t. DR. S r or practicing
immediately a uch a complian CA, CS or cost
ft e r closure o ce report shal a c c o u n ta n t to
f all formalitie l be placed in o v e rs e e
s. BoD meeting
Additional Poin held
ts:
1. DRs can b
e issued by pu
traded on loca blic offering o
l platforms. r private place
2. DRs can ment in line w
be based on ne ith jurisdictio
w o r n ru le s, and
3. Underlyin ex isting shares,
g shares alloc as per CG or R
such Overseas ated to overse BI conditions.
Depository Ban as depository
4. DR holder k. & against such sh
s can be compa ares, DRs is su
5. Overseas ny members , v ed by
depository vo ote a ft e r DR-t
tes for DR hold o-share conver
ers unti \ conver . sion , per Sche
sion. me a n d A
c t.

3.14
 Section 42: Private Placement (PP)
Definition:
► "Private placement" means any offer or invitation to subscribe
► to a select group of persons by a company (other than by way of public offer)
► through private placement offer-cum-application ("PPOCA"), which
► satisfies the conditions specified in this section.

Provision:
1. Subject to this section, a company may make private placement (PP) of securities

2. Private placement:
► PP to be made only to select group of person identified by BoD ("Identified Persons" (IPs)).
► No. of IPs shall not exceed 50 or higher no. prescribed (200 members in aggregate in FY)
► Above limit of 200 not t o include - QIBs and employees being offered securities under
ESOP u/ s 62 [N.A. - NBFC and HFC if Regulation by RBI/NHB complied with)

Explanation- It is hereby clarified that restrict ions of 200 members would be reckoned
individually for each kind of security t hat is equity share, preference share or debent ure.

~ Rule 14: Private Placement:

The proposal to make PP has to be previously approved by SH of co. by a SR for each such PP.

ES annexed t o noti ce for SH approval shall made following disclosure:

a. particulars of the offer including date of passing of Board resolution;
b. kinds of securities offered and the price at which security is being offered:
c. basis or justification for the price {incl. premium, if any) at which offer/invitation is made;
d. name and address of valuer who performed valuation;
e. amount which the company intends to raise by way of such securities;
f. material terms of raising such securities

Provided that this sub-rule shall not apply (i.e., SR not required) in case of offer for NCD if
amount raised <= Limit u/s 180{l){C) and in such case, BoD resoln is adequate.

Provided also that, if amount raised exceed limit u/s 180{l){c)- It shall be sufficient if company
passes a previous SR only once in a year for all such offers during the year.

Provided also that: In case of offer to QIBs, if company passes previous SR only in a year for
all such allotments during the year

Provided also t hat no offer or invitation of any securities under this rule shall be made to a
body corporate incorporated in, or a national of, a country which shares a land border with
India, unless such body corporate have obtained Government approval under FEM (Non-debt
Instruments) Rules, 2019 & such approval is attached with PPOCA.". [Amendment]

Prospectus and. Allotme~t of 5¢curities.

' . .
 3. Company mak
e PPOCA in For PAS 4 to IPs whose names
ing PP sha\\ issu
re co rd ed by co
mpany In pr es cr
m - and addresSt
N o te - PPOs sha\ ib ed manner· . s
\ NOT ca rr y ri gh .
t o f renunciation
N9te: D ee m eq fu .
► If a company bl ic Of.fur:
makes an o ff er .
► th e same shall b e to allot se cu ri ti. to > re sc ri b ed no. o f IP
es P s,
► shall accordingl deemed to b e an o ff er to public a nd
y b e governed by f h ' Ch t
► ir re sp ec ti th e provisions o
ve o f w he th er or f P ar t I O
t IS
,. w he th er th e not th e paymen f
t o r se c u ri ti es h as b ee op e r . d
company •intend n re ce iv e o r
s to \1• st ,t· s se ·t ·
cu r, ,e s o r n o t on any RSE
in o r o u ts id e In
4. Mode o f paym d·IQ
ent o f subscripti
IP s willing to su on money:
bs cr ib e to pp is
along with subscr su e shal\ apply in
iption money pa th e PP and ap pl
id ei th er by cheq ic at io n is su ed
ue/DD or o th er to such perS(w
banking ch an ne
Application mon l & no t by CQs\l
ey not to b e util
RoC. ized unless allo
tment made and
re tu rn o f al lo tm
en t filed with
5. Prohibition
on F re sh o ff er :
No fr es h o ff er
unless:
a. allotments w
.r .t , any o ff er or
b. th at o ff er o invitation made
r invitation has ea rl ie r have be en
Concept clarity been withdra. n co m pl et ed o r
check: o r aba11doned by
th e company
T he prohibit ion
applies fo r d if fe
ou cannot st ar t re n t kil'ld o f secu
PP of de be nt ur es r1t1es also i.e., if
also unless PP o pp of Eq ui ty is
f eq ui is y e t to finish
6. Allotment: com lete d or w
it h d ra w n .
'
, Company shal
l allot it s se curi
, If co. f ai Is to I ti es within 60 da
a lot se curiti es ys fr om re ce ip t
If in 60 days - Rep o f appl · t ·
, company f ai Is t o ay same within 15 1
expiry o f 6 0 th repay - It shall
be days f ca ion m. oney
day (r ea d again , liabl e to repay th rom ex p ir y o f 6
from which day? at money+ In tt @ o 0 days
)
· 12 10
Application mon p.a. from
ey shall be ke pt
utilized fo r any in a se pa ra te ba
purpose o th er th nk account in a
a. Adjustment an : scheduled b a k
against allotmen
b. Repayment t n + N o t to be
- If company un
able to allot sec.
7 . Company mak
ing PP shall N O T
o r di st ri bu ti on re le as e any publ
channels or ag en ic advertisemen
ts to inform th e ts or utilise any
public at large ab media m ar .
8 . Return o f A ou t su ch an issue.'
llotment to be fi keting
Company making led aj th RoC with
PP to file with Ro in 15 days from
C a "Return o f A allotment da te
th e d at e o f th e llotment" in Form
allotment. (Incl. PAS - 3 within
no . o f se c. al lo tt a complete list o 15 da ys fr
ed , et c.) f all allottees , w
ith th ei r full nam
es , ad d re ss :;
3 .16
'
_ II
 ~•@ICl41MI A#t·B91,Mblii•PAS1hll·i·- 3B·Eshall include the following details:
allotment in Form
Return of
and E-mail ID of such security holder;
► the full name, address, permanent Account Number
► the class of security held;
► the date of allotment of security ;
paid on such securities; and particulars of
► no. of securities held, nominal value and amount
d for consideration other than cash.
consideration received if entire securities were issue

Company, its promoters and directors - Fine Rs.

9. Default in filing Return of allotment u/ss (8) -
1,000/day for each default upto Rs. 25 lakhs

on - Company, its promoters and directors -

10. If company makes PP in contravention of this secti
PP or Rs. 2 crores, whichever is lower, and
Fine which may extend to amount raised through the
rest (12%) within 30 days of order imposing
the company shall also refund all monies with inte
the penalty.

defined in SEBI (ICDR) Regulations, 2009.

"Qualified Institutional Buyer" means the QIB as

(Continued
~ Rule 14: Prjvaf~_P_lacetnicati
~n{
on lette r shall be in Form PAS-4 serially numbered and
addressed
► PP offe r cum appl
e and shall be sent to him, eith er in
specifically to the person to whom the offe r is mad
name of such person u/s 42(3).
writing or in e-mode, within 30 days of recording the
in Form PAS-5
► Company to maintain complete record of PP offe rs
R filed with RoC
► Company shall issue PP offe r only afte r relevant SR/B

pliance with the provision of Sec 42 shall be

Note - Any offe r or invitation which is not in com
apply accordingly.
trea ted as public offe r and relevant provisions shall

You get what you give.

99
)

3.17