Companies Act Section 32 — Red herring prospectus
CHAPTER III PROSPECTUS AND ALLOTMENT OF SECURITIES
Commercial / Corporate
Summary
Sub-section (1) allows a company that plans to offer securities to issue a red herring prospectus before it issues the final prospectus.
Sub-section (2) requires a company that wants to issue a red herring prospectus to file it with the Registrar at least three days before the subscription list opens and the offer begins.
Sub-section (3) states that a red herring prospectus carries the same obligations as a regular prospectus, and any differences between the red herring prospectus and the final prospectus must be clearly highlighted as variations in the final prospectus.
Sub-section (4) requires that once the offer of securities closes, the company must file a prospectus with the Registrar and the Securities and Exchange Board. This prospectus must state the total capital raised, whether through debt or share capital, the closing price of the securities, and any other details that were not included in the red herring prospectus.
The explanation clarifies that a red herring prospectus is a prospectus that does not include complete details of the quantity or price of the securities it covers.
Official Text
(1) A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.
(2) A company proposing to issue a red herring prospectus under sub-section (1) shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer.
(3) A red herring prospectus shall carry the same obligations as are applicable to a prospectus and any variation between the red herring prospectus and a prospectus shall be highlighted as variations in the prospectus.
(4) Upon the closing of the offer of securities under this section, the prospectus stating therein the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details as are not included in the red herring prospectus shall be filed with the Registrar and the Securities and Exchange Board.
Explanation.—For the purposes of this section, the expression “red herring prospectus” means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.