Companies Act Section 27 — Variation in terms of contract or objects in prospectus
CHAPTER III PROSPECTUS AND ALLOTMENT OF SECURITIES
Commercial / Corporate
Summary
Sub-section (1) states that a company cannot change the terms of a contract mentioned in its prospectus, or change the objects (purposes) for which the prospectus was issued, unless the change is approved by the company's shareholders in a general meeting through a special resolution, or unless the company has been given authority to do so by such a resolution.
The first proviso to sub-section (1) says that when such a resolution is passed, the company must also publish details of the notice about the resolution in newspapers—one in English and one in the local vernacular language—in the city where the company's registered office is located. This notice must clearly state the justification for the variation.
The second proviso to sub-section (1) prohibits the company from using any money raised through the prospectus to buy, trade, or otherwise deal in equity shares of any other listed company.
Sub-section (2) deals with dissenting shareholders, meaning those shareholders who did not agree to the proposal to vary the terms of contracts or objects in the prospectus. These dissenting shareholders must be given an exit offer by the promoters or controlling shareholders. The exit price, manner, and conditions of this offer are to be specified by the Securities and Exchange Board through regulations made for this purpose.
Official Text
(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:
Provided 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:
Provided 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.