Prospectus Types: Self, Red Herring, Abridged

Types of Prospectus

• The Companies Act 2013 outlines four types of prospectus: self prospectus, red herring prospectus, abridged prospectus, and deemed prospectus.

Self Prospectus

• Section 31 of the Companies Act 2013 defines the self prospectus.
• It allows a company to issue a single prospectus for multiple offerings of securities or classes of securities.
• This removes the need for separate prospectuses for each subsequent offer.
• With a self prospectus, the issuer does not need to issue a further prospectus for each new offer.
• A self prospectus has a validity period of one year from the date of the first offer.
• Within the one-year validity period, a company can make a maximum of four offers.
• An information memorandum must be filed between each offer.
• An information memorandum contains all the facts of any changes in the company.
• Includes details of any created charges or changes to the company's financial position since the last offer.
• It contains all the important details to ensure accuracy.
• The full prospectus comprises the information memorandum and the self prospectus.

Red Herring Prospectus

• Section 32 of the Companies Act covers red herring prospectus-related provisions.
• It's a prospectus without complete details on the quantity or price of the securities being offered.
• Companies may issue it before an IPO or FPO when prices aren't yet fixed.
• The red herring prospectus must be submitted to the registrar at least three days before the subscription list or offer opens.
• All obligations that apply to a standard prospectus also apply to a red herring prospectus.
• Any variations between the red herring prospectus and the final prospectus must be clearly highlighted and disclosed.
• It's often used for book-building to discover the correct prices.

Abridged Prospectus

• Section 2 subsection 1 of the Companies Act 2013 defines the abridged prospectus.
• Section 33 deals with how to use the averages prospectus.
• An abridged prospectus contains the salient features of a prospectus as specified by SEBI regulations.
• Contains all the information that is in the prospectus but in summary form.
• Section 33 mandates that an application form MUST have an abridged prospectus attached.
• This provides potential investors with a concise overview of the offering when applying for shares.

Deemed Prospectus

• Section 25 subsection 1 covers the Deemed Prospectus.
• A deemed prospectus is any document by which a company offers securities for sale to the public.
• Agreements to allot securities, and any document used to offer the sale, all count under deemed prospectus.
• It includes advertisements, notices, pamphlets, circulars, or any other document through which offers are made.