This article has been written by Mr. Aman Mishra, a 5th year student studying BALLB, from at IMS Unison University, Dehradun.

Introduction: –

A shelf Prospectus is a type of a prospectus it issued by a company which is making a multiple issues of a bond and for raising their funds to the prospectus. A public Company limited by shares must collect the capital equal to amount to minimum subscription for the commencement of its business. If the company desire to collect its capital by the issue of shares to the public, the company has to invite to public to purchase the shares of the company, therefore issues prospectus to the public.

A prospectus is just like an advertisement giving s complete picture of the company, its future activities, plans and programme. It must disclose all the material and essential particulars. Section 2(70) of the Company Act, 2013 defines “prospectus” means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or Or shelf prospectus mentioned in section 31 or any note, round, commercial or different report inviting gives from the public for the subscription or purchase of any securities of a body company.

What is a shelf prospectus?

Any magnificence or lessons of organizations, as the Securities and Exchange Board can also provide by way of regulations in this behalf, might also document a shelf prospectus with the Registrar on the diploma blanketed therein which shall suggest a duration now not exceeding three hundred and sixty five days as the length of validity of such prospectus which shall start from the date of establishing of the primary provider of securities underneath that prospectus, and in respect of a second or next provide of such securities issued for the duration of the length of validity of that prospectus, no in addition prospectus is needed. A agency submitting a shelf prospectus shall be required to document an facts memorandum containing all cloth data referring to new prices created, adjustments in the financial position of the company as have occurred between the first offer of securities or the previous offer of securities and the succeeding offer of securities and such other changes as may be prescribed, with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus:

Provided that where a business enterprise or every other character has received programs for the allotment of securities along with increase bills of subscription earlier than the making of the sort of trade, the employer or other person shall intimate the modifications to such applicants and if they explicit a desire to withdraw their software, the enterprise or different person shall refund all the monies received as subscription inside fifteen days thereof. 

Criteria for companies

To be able to begin the registration to offer securities via submitting a shelf prospectus, a business enterprise should first meet sure requirements. Their requirements are as follows:

• The company is required to make and submit an agreement for the dematerialization of securities, and the arrangement will have to be made with a SEBI registered depository.
• The company is required to have a net worth that is above 5,000 crores to be able to file its shelf prospectus.
• It must be ensured that the securities the company is issuing have a credit rating that is at least an AA- or above.
• Promoters or directors of the company should not have any regulatory action taken against them; else they don’t qualify.
• The company must be up to date on their repayment of deposits.

How is a shelf prospectus useful for an investor?

A shelf prospectus allows regulators make certain that the businesses which can be supplying the securities are of credible stature, therefore passing this credibility onto the securities they are providing. Through a series of rules, tips and necessities, an enterprise employer can be in short but correctly evaluated via a shelf prospectus. However, it additionally offers buyers benefits. A shelf prospectus has details about the business enterprise as well as its directors and promoters, which allows traders to assess the threat this is related to the securities which can be being offered. It is also advisable that as an investor, you furthermore might observe the financials of the company to assess threat higher.

Conclusion: – 

Prospectus is an advertisement giving a complete picture of the company. It must disclose all material and essential particulars. The prospectus must be issued within 90 days after the date on which a copy thereof is delivered for registration. Prospectus is an official notice of formations of new company. The company Act imposes civil as well as criminal liability for misleading statement in the prospectus. A private company is prohibited from inviting monitory participation of the public. A statement in lieu of prospectus is issued when the promoters of the public company do not want to invite the public to subscribe for the shares.