Variation in terms of contract or objects in prospectus
📚 Law Minded summary
Money raised on a prospectus has to be used for what the prospectus said it would be used for.
Changing those objects, or the terms of a contract mentioned in the prospectus, needs a special resolution of the members. The company also has to advertise the proposal so shareholders actually learn of it.
Anyone who disagrees gets an exit: dissenting shareholders must be offered the chance to have their shares bought back, on terms SEBI prescribes.
(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.
All sections in Chapter III — Prospectus and Allotment of Securities