CAIIB BRBL Module D Unit 21 : Prospectus

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Nov 28

CAIIB Paper 4 BRBL Module D Unit 21 : Prospectus (New Syllabus)

IIBF has released the New Syllabus Exam Pattern for CAIIB Exam 2023. Following the format of the current exam, CAIIB 2023 will have now four papers. The CAIIB Paper 4 (BANKING REGULATIONS AND BUSINESS LAWS) includes an important topic called "Prospectus". Every candidate who are appearing for the CAIIB Certification Examination 2023 must understand each unit included in the syllabus.

In this article, we are going to cover all the necessary details of CAIIB Paper 4 (BRBL) Module D (COMMERCIAL & OTHER LAWS WITH REFERENCE TO BANKING OPERATIONS) Unit 21 : Prospectus, Aspirants must go through this article to better understand the topic, Prospectus and practice using our Online Mock Test Series to strengthen their knowledge of Prospectus. Unit 21 : Prospectus

Prospectus

The Companies Act, 2013 {Sec. 2(70)} defines a prospectus as any document described or issued as a prospectus and includes a red herring prospectus (Sec. 32) or shelf prospectus (Sec. 31) or any notice, circular, advertisement or other document inviting offers from the public for subscription or purchase of any securities of a body corporate.

As per Section 32

A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.
A company proposing to issue a red herring prospectus shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer.
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.
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.

Red herring prospectus

Means a prospectus which does not include complete particulars of the quantum or price of the securities included therein. Shelf prospectus means a prospectus in 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.

In the following cases, even though shares are offered to the public, issue of prospectus is not required:

When a person is invited to enter into an underwriting agreement/arrangement to purchase/subscribe the shares.
When the shares are offered only to the existing shareholders or debenture-holders of the company.
When the shares or debentures offered are, in all respects, uniform with the shares or debentures previously issued and listed on a recognized stock exchange.

Compliance With Respect To Prospectus

Time of issue of Prospectus: A prospectus can be issued only after the incorporation of the company.
Contents of the Prospectus: Section 26 of the Companies Act, 2013 stipulates the mandatory provisions that are to be stated in the prospectus.
Date of publication: It is stated that a prospectus must be dated and this ensures a prima facie evidence of the date of its publication.
Signature of every director on the Prospectus: A prospectus must be signed by every person mentioned therein as a director or proposed to be a director.
Application form with a Prospectus: Every application form for shares must be accompanied by a copy of the prospectus except for the application forms issued to underwriters and existing shareholders and debenture holders.
Statements by Expert in Prospectus: A prospectus, including a statement purporting to be made by an expert, cannot be issued unless he has given his written consent to the issue thereof and he has not withdrawn such consent before the delivery of a copy of the prospectus for registration to the Registrar of Companies
Registration of the Prospectus: Before the issue of a prospectus the same must be delivered to the Registrar of Companies for registration with the documents. No prospectus shall be valid if it is issued more than ninety days after the date on which a copy thereof is delivered to the Registrar.

Misstatements In A Prospectus And Remedies

A person who has been induced to subscribe for shares or debentures on the faith of a statement in a prospectus which is untrue has a twofold remedy:

Remedy against the company
Remedy against the promoters and experts who were responsible for the issue of the prospectus. The liability can be civil or criminal.

Civil Liability

Remedies against the Company: If there are untrue statements or misstatements or omissions in a prospectus which have induced any shareholder or debenture holder to buy shares or debentures respectively, the person has two fold remedies:

Rescind the contract
Claim damages from the company whether the statement is a fraudulent one or innocent one.

Claim remedies against the promoters and experts: who were responsible for or associated with the issue of the prospectus. A suit for damages can be filed for misstatements in the prospectus

Criminal Liability

It is required that certain matters and reports must be stated in the prospectus. Failure to do so will render the director or any other person responsible for the issue of such prospectus to be punished with fine.

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CAIIB Paper 4 (BRBL) Module D Unit 21-Prospectus ( Ambitious_Baba )