Search Your Query Here

What is a Shelf Prospectus in Company Law in India? Explained

Shelf Prospectus is a kind of Prospectus only.

Definition of Shelf Prospectus

Refer Section 31 of the Companies Act, 2013 for the provisions on shelf prospectus.

Shelf prospectus means "a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus".
shelf prospectus in company law

What is a Shelf Prospectus? In simple words.

A public company issues securities to public through prospectus (known as a 'public offer') by following the due process under company and securities law.

Such a company is required to issue the prospectus every time it wants to issue securities. This is a cumbersome process.

In order to save time and simplify this process, there is a leeway given under law.

Such companies can issue a one time prospectus which will be valid for a certain time period.

During this period, every time the company wishes to issue securities as per that prospectus - they don't have to go through the whole process of issue of fresh prospectus.

This prospectus is called shelf prospectus.

Just like in our houses, we have a shelf or shelves where we keep things to be used in future whenever necessary.

Filing of Shelf Prospectus

i) SEBI may prescribe the class/classes of companies who may file a shelf prospectus with ROC.

ii) Such companies will have to file the shelf prospectus at the stage of their first offer of securities.

iii) The shelf prospectus shall indicate the period of its validity, which shall not exceed a period of 1 year. Validity period commencement shall be counted from the date of opening of 1st offer.

iv) For all offers of securities after the 1st offer, no further prospectus is required to be issued. This is within the period of validity as indicated in shelf prospectus.

Information Memorandum

In case of issue of 2nd or subsequent offer of securities under the shelf prospectus, companies are required to file an information memorandum with the ROC. One month prior to issue, it is to be filed.

The information memorandum contains all material facts relating to new charges created, changes in the financial position of the company as have occurred between the 1st offer of securities or the previous offer of securities and the succeeding offer of securities and such other changes as may be prescribed.

Read more at: Information Memorandum

Deemed Prospectus

In case of issue of 2nd and subsequent offer of securities, the information memorandum to be filed together with the shelf prospectus already filed - is deemed to be a prospectus.