Shelf Prospectus Meaning under Companies Act 2013 was defined in Section 31. Shelf Prospectus is mostly used by Banking, Finance and Infrastructure Companies. Once a company obtains a Shelf Prospectus, it can make any number of Public offers in the specified period. In simple terms, a Shelf Prospectus will have an expiry date of 1 year. Also Read our earlier posts on Bonus Issue of Shares, Issue of Shares with Differential Voting Rights, Section 189 of Companies Act 2013, Reduction of Share Capital and the concept of Right Shares under the Companies Act 2013.
Definition of 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. Accordingly as per Section 31 –
Validity of Shelf Prospectus as per Section 31 Companies Act 2013
Any class of companies, as prescribed by the Securities and Exchange Board may file a shelf prospectus with the Registrar at the stage of the first offer of securities included therein which shall indicate a period not exceeding one year as the period of validity of such prospectus which shall commence from the date of opening of the first offer of securities under such prospectus.
Further, in respect of a second or subsequent offer issued during the period of validity of shelf prospectus, no further prospectus is required.
Information Memorandum under Shelf Prospectus
A company filing a shelf prospectus shall be required to file an information memorandum containing all material facts relating to new charges created, changes 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 and other prescribed changes, with the Registrar within the prescribed time, prior to the issue of a second or subsequent offer of securities under such prospectus.
Advance Payments : Shelf Prospectus
Where a company or any other person has received applications for the allotment of securities along with advance payments of subscription before the making of any such change, they shall intimate the changes to such applicants. If the applicants express a desire to withdraw their application, the company or other person shall refund all the monies received as subscription within fifteen days.
Deemed Shelf Prospectus
Where an information memorandum is filed, every time an offer of securities is made as aforesaid, such memorandum together with the shelf prospectus shall be deemed to be a prospectus.
Information Memorandum to be filed before the issue of a second or subsequent offer of securities under the shelf prospectus
Rule 10 of Companies (Prospectus and Allotment of Securities) Rules, 2014 states that the information memorandum shall be prepared in Form PAS-2 and filed with the Registrar along with the fee as provided in the Companies (Registration Offices and Fees) Rules, 2014 within one month prior to the issue of a second or subsequent offer of securities under the shelf prospectus.
Benefits of Shelf Prospectus
The concept of shelf prospectus will save expenditure and time of the companies in issuing a new prospectus every time they wish to issue securities to the public within a period of one year.
Quick Revision of Shelf Prospectus
The Shelf Prospectus shall indicate a period not exceeding 1 year as the period of validity of such prospectus.
The period of 1 year shall commence from the date of opening of the first order of securities under the shelf prospectus.
With respect to second or any subsequent offer of such securities issued during the period of validity of shelf prospectus, no further prospectus shall be issued.
Prior to the issue of second or subsequent offer of securities under the shelf prospectus, the company shall be required to file an information memorandum with the Registrar.
- 1 Definition of Shelf Prospectus
- 2 Validity of Shelf Prospectus as per Section 31 Companies Act 2013
- 3 Information Memorandum under Shelf Prospectus
- 4 Advance Payments : Shelf Prospectus
- 5 Deemed Shelf Prospectus
- 6 Benefits of Shelf Prospectus
- 7 Quick Revision of Shelf Prospectus