Issue of application forms for securities
📚 Law Minded summary
You cannot hand someone an application form for securities on its own.
Every form must come with an abridged prospectus — a short-form version of the real thing — so that nobody applies for securities without at least a summary of what they are buying.
The exception is where the form is issued in connection with a genuine invitation to enter into an underwriting agreement, which is a deal between professionals rather than an offer to the public.
(1) No form of application for the purchase of any of the securities of a company shall be issued unless such form is accompanied by an abridged prospectus: Provided that nothing in this sub -section shall apply if it is shown that the form of application was issued—
(a) in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to such securities; or (b) in relation to securities which were not offered to the public.
(2) A copy of the prospectus shall, on a request being made by any person before the closing of the subscription list and the offer, be furnished to him.
(3) If a company makes any default in complying with the provisions of this section, it shall be liable to a penalty of fifty thousand rupees for each default.
All sections in Chapter III — Prospectus and Allotment of Securities