This article has been written by Ms. Sonakshi Singhla, a student of Army Institute of Law, Mohali

INTRODUCTION

Abridge, according to the dictionary, means to condense something without losing its original meaning. The Indian Companies Act, Section 2(1), defines an abridged prospectus as a memorandum that contains all the key elements of the prospectus as determined by the SEBI. 

A prospectus can also be characterized as a document that a company uses to invite the public to invest in it or buy its securities. It contains in-depth details about the company’s financial situation, its directors and their contact information, the names of the memorandum’s signatories, the items up for public bid, newly created fees, changes to the company’s finances, etc

ABRIDGED PROSPECTUS- MEANING

Section 2(1) of the Companies Act 2013 defines an abridged prospectus as a memorandum that contains those salient elements of a prospectus that are prescribed by the Securities and Exchange Board by establishing regulations in this regard.

Consequently, it is a document that includes a prospectus summary.  The prospectus, which contains the information required by the Securities and Exchange Board of India (SEBI), is intended to be summarized in this document without leaving out any material information.

Any notice, circular, advertisement, or another document that serves as the public’s offer to buy any corporate body’s securities is considered to be a prospectus. A document must satisfy either of the two requirements from the list below to be classified as a prospectus. It should either request deposits or subscriptions to common shares or debentures.

IMPORTANCE OF ABRIDGED PROSPECTUS

• A prospectus is a very lengthy document, and in today’s fast-paced world, it is unrealistic to expect investors to read it cover to cover. One needs concise, accurate, and timely information about the business. An abbreviated prospectus is created to accomplish this. It is only five sheets long and is entirely made up of bullet points.
• It saves the investors’ time and is quick and simple to comprehend.
• It enables the business to complete a legal requirement before considering offers from the general public. The company will be fined Rs. 50,000 each time it doesn’t release the abridged prospectus.
• It avoids the expense of a capital public offering.
• It provides a clear understanding of the investor’s rights and the types of investments they are making. 
• Sec 33 of The Companies Act 2013, lays down that no form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an abridged prospectus. According to this, a company is not permitted to accept offers from the public, and the public is not permitted to invest in a company without first receiving an abbreviated prospectus. It has been made mandatory to give investors the ability to understand the nature, rights, and consequences that will result from investments, protecting the investor in the process.

ESSENTIALS OF ABRIDGED PROSPECTUS

• The abridged prospectus should contain all the information about the company, which helps with identification. This includes the full name of the business, brand names, logo, etc.  Doing this also allows investors to distinguish between companies and brands with similar names.
• The prospectus also needs to include information about their directors. As a listed company is required to notify investors of changes to the board of directors, this information is typically already public knowledge. However, reiterating the same in the prospectus enables investors to assess their choice using just one document.
• The prospectus should also include all the information regarding the offered security. If it’s a stock offering, for instance, it should detail the class to which the shares belong and their voting rights. On the other hand, if it’s a bond offering, the prospectus needs to include details like the face value, tenure, and coupon rate. In other words, an abbreviated prospectus ought to be a one-stop shop for all the technical details of the offering.
• Every offer will also have a minimum offering sum. This is the bare minimum that needs to be purchased in the stock offering. Likewise, in a bond offering, this could be the minimum amount of bonds you should buy.
• Information on application fees and other costs associated with the offer should also be included in the prospectus.
• Abridged prospectuses should also include information about the offering’s underwriters.
• Additionally, reports on the company’s audited profits and losses will be included, which will aid investors in their choice to invest in the business.

FORMAT OF ABRIDGED PROSPECTUS

General Instructions

The abridged prospectus shall be in Times New Roman size 10 with 1.0 line spacing on A4 size paper. The generic information must be provided in the form of a general information document.  A copy of the abridged prospectus shall be submitted to SEBI. The abridged prospectus including the application form shall not exceed 5 sheets.

Disclosures

• When issuing securities to the public, an issuer must disclose the total number of pages, whether the issue is 100% book building or fixed price. 
• The issuer’s name and logo, corporate identity number, information about its registered office and registrar, and contact information
• The opening and closing dates of the offering, as well as details on the price, the minimum bid, and the name of the reputable stock exchange where the specified securities are listed.
• Details about the ten largest shareholders, as well as information on the company’s promoters and board of directors.
• Outstanding criminal proceedings against the promoter, the top five significant pending lawsuits against the company and the amount at stake, any disciplinary actions taken by SEBI or the stock exchange against the promoter/group companies, including any pending actions in the last five years.
• Information on joint ventures, subsidiaries, and group companies.
• All pending government and other approvals are listed in detail. 
• The authorized, issued, subscribed, and paid-up capital, an overview of the assets and liabilities, information on dividends and bonus issues, and a profit and loss account for the previous five years.
• Company/group, project/object specific risks should be mentioned in bold, italics, and be highlighted. Risks resulting from offences/litigations/losses.
• Objects of the issue, cost, and means of financing of the project.
• Data on the stock market, including the highest and lowest closing prices, total volume (separately for all stock exchanges), and the maximum aggregate turnover of multiple shares traded over the previous six months.

CONCLUSION

A prospectus is a crucial document that enables investors to make knowledgeable choices regarding a company’s offer to sell its stock to the general public. The SEBI has mandated the issuance of an abridged prospectus, which is a summary that only includes the most crucial information in a detailed prospectus, due to the fact that a prospectus can be extremely detailed and contain a wealth of information. This is called the abridged prospectus. An abridged prospectus ensures that investors do not miss the important details of the company’s issue in the sea of information contained in the detailed prospectus. Make sure you read them thoroughly to ensure your investments are in line with you.

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