Companies Act Section 387 — Dating of prospectus and particulars to be contained therein
CHAPTER XXII COMPANIES INCORPORATED OUTSIDE INDIA
Commercial / Corporate
Summary
Sub-section (1) prohibits anyone from issuing, circulating, or distributing in India a prospectus that offers securities of a company incorporated or to be incorporated outside India, regardless of whether that company has or will have a place of business in India. Such a prospectus must be dated and signed, and it must contain specific particulars.
Under clause (a) of sub-section (1), the prospectus must include details about the instrument that defines the company's constitution, the laws under which the company was incorporated, and the address in India where these documents or certified English translations can be inspected. It must also state the date and country of incorporation, and whether the company has established a place of business in India, including the address of its principal office if applicable.
Under clause (b) of sub-section (1), the prospectus must also state the matters specified under section 26 of the Act. The proviso to this sub-section states that the requirements under sub-clauses (i), (ii), and (iii) of clause (a) do not apply if the prospectus is issued more than two years after the company is entitled to commence business.
Sub-section (2) declares void any condition that requires an applicant for securities to waive compliance with any requirement imposed by sub-section (1), or that purports to give the applicant notice of any contract, document, or matter not specifically referred to in the prospectus.
Sub-section (3) prohibits issuing a form of application for securities of such a foreign company to any person in India unless the form is issued together with a prospectus that complies with the provisions of this Chapter and does not contravene section 388. The proviso states that this sub-section does not apply if the form of application was issued in connection with a bona fide invitation to a person to enter into an underwriting agreement regarding the securities.
Under clause (a) of sub-section (4), this section does not apply to a prospectus or form of application issued to existing members or debenture holders of the company, even if they have the right to renounce the securities in favour of others. Under clause (b), except for the requirement that a prospectus be dated, this section also does not apply to a prospectus relating to securities that are uniform with previously issued securities already dealt in or quoted on a recognised stock exchange. However, subject to these exceptions, the section applies to a prospectus or form of application whether issued on or with reference to the formation of a company or subsequently.
Sub-section (5) states that nothing in this section limits or diminishes any liability a person may incur under any law in force in India or under this Act apart from this section.
Official Text
(1) No person shall issue, circulate or distribute in India any prospectus offering to subscribe for securities of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless the prospectus is dated and signed, and—
(a) contains particulars with respect to the following matters, namely:—
(i) the instrument constituting or defining the constitution of the company;
(ii) the enactments or provisions by or under which the incorporation of the company was effected;
(iii) address in India where the said instrument, enactments or provisions, or copies thereof, and if the same are not in the English language, a certified translation thereof in the English language can be inspected;
(iv) the date on which and the country in which the company would be or was incorporated; and
(v) whether the company has established a place of business in India and, if so, the address of its principal office in India; and
(b) states the matters specified under section 26:
Provided that sub-clauses (i),
(ii) and
(iii) of clause (a) of this sub-section shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business.
(2) Any condition requiring or binding an applicant for securities to waive compliance with any requirement imposed by virtue of sub-section (1), or purporting to impute him with notice of any contract, documents or matter not specifically referred to in the prospectus, shall be void.
(3) No person shall issue to any person in India a form of application for securities of such a company or intended company as is mentioned in sub-section (1), unless the form is issued with a prospectus which complies with the provisions of this Chapter and such issue does not contravene the provisions of section 388:
Provided that this sub-section shall not apply if it is shown that the form of application was issued in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to securities.
(4) This section —
(a) shall not apply to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to securities of the company, whether an applicant for securities will or will not have the right to renounce in favour of other persons; and
(b) except in so far as it requires a prospectus to be dated, to the issue of a prospectus relating to securities which are or are to be in all respects uniform with securities previously issued and for the time being dealt in or quoted on a recognised stock exchange, but, subject as aforesaid, this section shall apply to a prospectus or form of application whether issued on or with reference to the formation of a company or subsequently.
(5) Nothing in this section shall limit or diminish any liability which any person may incur under any law for the time being in force in India or under this Act apart from this section.