Amended and updated notes on section 26 of Companies Act 2013. Detail discussion on provisions and rules related to matters to be stated in prospectus.
Chapter III (Sections 23–42) of the Companies Act, 2013 (CA 2013) deals with the provisions related to prospectus and allotment of securities. Section 26 of CA 2013 provides for matters to be stated in prospectus.
Recently, we have discussed in detail section 25 (Document containing offer of securities for sale to be deemed prospectus) of CA 2013. Today, we learn the provisions of section 26 of Companies Act 2013 read with the Companies (Prospectus and Allotment of Securities) Rules, 2014.
Section 26 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification was come into force from 1st April, 2014 i.e. the commencement date of section 26 is 1-4-2014.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | III |
| Chapter Name | Prospectus and Allotment of Securities |
| Section No. | 26 |
| Section Name | Matters to be stated in prospectus |
| Monthly Updated Edition | Company Law PDF |
Section 26 (Matters to be stated in prospectus) of Companies Act 2013
Section 26(1):
Section 26(1): Every prospectus issued shall be dated and signed and shall state such information and set out such reports on financial information as may be specified by SEBI in consultation with the CG.
The regulations made by SEBI in respect of such financial information or reports on financial information shall apply until the SEBI specifies the information and reports on financial information u/s 26(1).
A declaration shall be made about the compliance of the provisions of the Companies Act 2013 and a statement to the effect that nothing in the prospectus is contrary to the provisions of CA 2013, SCRA 1956 and SEBI Act 1992 and the rules and regulations made thereunder.
Section 26(2):
Section 26(2): The provisions of Section 26(1) shall not apply in the following cases:
(a) If prospectus issued to existing members or debenture-holders of a company; or
(b) If prospectus issued relating to shares or debentures which are in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange.
Section 26(3):
Section 26(3): The provisions of Section 26(1) shall apply to a prospectus whether issued on or with reference to the formation of a company or subsequently.
As per explanation of section 26(3), the date indicated in the prospectus shall be deemed to be the date of its publication.
Section 26(4):
Section 26(4): Prospectus shall not be issued unless a signed copy of such prospectus has been delivered to the Registrar for filing. Prospectus shall be signed by every director or proposed director or by his duly authorised attorney.
The word “filing” was substituted for the word “registration” by the Companies (Amendment) Act, 2019 with effect from 15th August 2019.
Section 26(5):
Section 26(5): A prospectus issued u/s 26(1) shall not include a statement purporting to be made by an expert:
- unless the expert is not engaged or interested in the formation or promotion or management of the company; and
- the expert has given written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to the Registrar for filing; and
- a statement to that effect shall be included in the prospectus.
The word “filing” was substituted for the word “registration” by the Companies (Amendment) Act, 2019 with effect from 15th August 2019.
Section 26(6):
Section 26(6): Every prospectus issued u/s 26(1) shall, on the face of it, —
(a) state that a copy has been delivered for filing to the Registrar; and
(b) specify any documents required by section 26 to be attached to the copy so delivered or refer to statements included in the prospectus which specify these documents.
The word “filing” was substituted for the word “registration” by the Companies (Amendment) Act, 2019 with effect from 15th August 2019.
Section 26(7):
Section 26(7): Omitted by the Companies (Amendment) Act, 2019 with effect from 15th August 2019.
Section 26(8):
Section 26(8): Prospectus shall not be valid if it is issued more than 90 days after the date on which a copy thereof is delivered to the Registrar.
Section 26(9):
Section 26(9): If a prospectus is issued in contravention of the provisions of section 26:
- the company shall be punishable with fine of ₹50,000 to ₹3,00,000; and
- every person who is knowingly a party to the
issue of such prospectus shall be punishable with
- imprisonment up to 3 years; or
- with fine of ₹50,000 to ₹3,00,000.
Feel free to ask any query related to the provisions of Section 26 of the Companies Act 2013 as amended by the Companies (Amendment) Act, 2019.
Section 26 of Companies Act 2013: Matters to be stated in prospectus
Section 26 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) dated 27-03-2014.
(1) Every prospectus issued by or on behalf of a public company either with reference to its formation or subsequently, or by or on behalf of any person who is or has been engaged or interested in the formation of a public company, shall be dated and signed and shall state such information and set out such reports on financial information as may be specified by the Securities and Exchange Board in consultation with the Central Government:
Provided that until the Securities and Exchange Board specifies the information and reports on financial information under this sub-section, the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992, in respect of such financial information or reports on financial information shall apply.
- (a) [Omitted]
- (b) [Omitted]
- (c) make a declaration about the compliance of the provisions of this Act and a statement to the effect that nothing in the prospectus is contrary to the provisions of this Act, the Securities Contracts (Regulation) Act, 1956 and the Securities and Exchange Board of India Act, 1992 and the rules and regulations made thereunder; and
- (d) [Omitted].
(2) Nothing in sub-section (1) shall apply—
- (a) to the issue to existing members or debenture-holders of a company, of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant has a right to renounce the shares or not under sub-clause (ii) of clause (a) of sub-section (1) of section 62 in favour of any other person; or
- (b) to the issue of a prospectus or form of application relating to shares or debentures which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange.
(3) Subject to sub-section (2), the provisions of sub-section (1) shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.
Explanation: The date indicated in the prospectus shall be deemed to be the date of its publication.
(4) No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless on or before the date of its publication, there has been delivered to the Registrar for filing, a copy thereof signed by every person who is named therein as a director or proposed director of the company or by his duly authorised attorney.
(5) A prospectus issued under sub-section (1) shall not include a statement purporting to be made by an expert unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion or management, of the company and has given his written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to the Registrar for filing and a statement to that effect shall be included in the prospectus.
(6) Every prospectus issued under sub-section (1) shall, on the face of it, —
- (a) state that a copy has been delivered for filing to the Registrar as required under sub-section (4); and
- (b) specify any documents required by this section to be attached to the copy so delivered or refer to statements included in the prospectus which specify these documents.
(7) [Omitted w.e.f. 15-08-2019 by the Companies (Amendment) Act, 2019]
(8) 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 under sub-section (4).
(9) If a prospectus is issued in contravention of the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable with imprisonment for a term which may extend to three years or with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees, or with both.