Section 27: Variation in terms of contract or objects in prospectus
This section is for regulating changes to the terms of a contract or objects stated in a company's prospectus, including requirements for approval and treatment of dissenting shareholders.
The section, clause by clause
What the section says
In plain terms
(1)A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, except subject to the approval of, or except subject to an authority given by the company in general meeting by way of special resolution:
A company cannot change the terms of a contract or objects stated in the prospectus without approval from a special resolution in a general meeting, and it must publish the details of the notice in newspapers, one in English and one in the vernacular language, and cannot use the raised amount to buy or trade equity shares of another listed company.
provisoProvided that the details, as may be prescribed, of the notice in respect of such resolution to shareholders, shall also be published in the newspapers (one in English and one in vernacular language) in the city where the registered office of the company is situated indicating clearly the justification for such variation:
provisoProvided further that such company shall not use any amount raised by it through prospectus for buying, trading or otherwise dealing in equity shares of any other listed company.
(2)The dissenting shareholders being those shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or controlling shareholders at such exit price, and in such manner and conditions as may be specified by the Securities and Exchange Board by making regulations in this behalf.
Shareholders who disagree with the changes to the contract or object terms must be given an exit offer by promoters or controlling shareholders at a specified exit price and conditions set by the Securities and Exchange Board.
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. The word “public” omitted by Act 22 of 2019, s. 7 (w.e.f. 15-8-2019).
- 2. Ins. by s. 7, ibid. (w.e.f. 15-8-2019).
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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.