Section 25: Document containing offer of securities for sale to be deemed prospectus
This section deems a document offering securities for sale to be a prospectus and applies relevant laws and rules to it, with specific requirements for its content and signing.
The section, clause by clause
What the section says
In plain terms
(1)Where a company allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company; and all enactments and rules of law as to the contents of prospectus and as to liability in respect of mis-statements, in and omissions from, prospectus, or otherwise relating to prospectus, shall apply with the modifications specified in sub-sections (3) and (4) and shall have effect accordingly, as if the securities had been offered to the public for subscription and as if persons accepting the offer in respect of any securities were subscribers for those securities, but without prejudice to the liability, if any, of the persons by whom the offer is made in respect of mis-statements contained in the document or otherwise in respect thereof.
A document offering securities for sale to the public is considered a prospectus if the company allots or agrees to allot securities with the intention of offering them for sale to the public, and all relevant laws and rules apply to this document.
(2)For the purposes of this Act, it shall, unless the contrary is proved, be evidence that an allotment of, or an agreement to allot, securities was made with a view to the securities being offered for sale to the public if it is shown—
It is assumed that an allotment of securities was made with the intention of offering them for sale to the public if an offer for sale is made within 6 months after the allotment or if the company has not received the full consideration for the securities at the time of the offer.
(2)(a)that an offer of the securities or of any of them for sale to the public was made within six months after the allotment or agreement to allot; or
(2)(b)that at the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it.
(3)Section 26 as applied by this section shall have effect as if —
The prospectus must state the net amount of consideration received by the company for the securities and the time and place where the contract for the allotment of securities can be inspected, and the persons making the offer are treated as directors of the company.
(3)(i)it required a prospectus to state in addition to the matters required by that section to be stated in a prospectus—
(3)(a)the net amount of the consideration received or to be received by the company in respect of the securities to which the offer relates; and
(3)(b)the time and place at which the contract where under the said securities have been or are to be allotted may be inspected;
(3)(b)(ii)the persons making the offer were persons named in a prospectus as directors of a company.
(4)Where a person making an offer to which this section relates is a company or a firm, it shall be sufficient if the document referred to in sub-section (1) is signed on behalf of the company or firm by two directors of the company or by not less than one-half of the partners in the firm, as the case may be.
If the person making the offer is a company or firm, the document only needs to be signed by 2 directors of the company or at least half of the partners in the firm.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Ins. by Act 1 of 2018, s. 8 (w.e.f. 7-5-2018).
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.