Meaning of Prospectus:

Sec. 2(36) of the Companies Act describes a prospectus as “any document issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any share in, or debentures of a body corporate.”In other words, it is a document which invites deposits from the public or invites offers from the public for the subscription of shares in, or debentures of, a company. The words “inviting deposits from the public” were added by the Companies (Amendment) Act, 1974.

 There are four types of  prospectus ;

Abridged Prospectus:

According to Section 2(1) of the Act abridged prospectus means a memorandum containing such salient features of a prospectus as may be specified by the SEBI by making regulations in this behalf .It means that a company cannot issue an application form for the purchase of securities unless such form is accompanied by an abridged prospectus The purpose of it to reduce the expense burden of a public issue. The full prospectus has to be maintained in the office of the company. Under Section 33(2) of the Companies Act, 2013 a copy of the prospects has to be given to a person who requests for it before the closing of the offer and the subscription is

 Deemed Prospectus:

According to Section 25 (1) of the Act,  where a company allots or agrees to allot securities of the company with a view to all or any of these securities being offered for sale to the public.Any document by which such offer for sale to the public is made is deemed to be a prospectus by implication of law.

 Shelf Prospectus.

According to Section 31 of the Act, Shelf prospectus is a prospectus in respect of which  the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without he issue of a further prospectus. Only the companies which have been prescribed by the SEBI can issue a Shelf prospectus with the Registrar.

A company is required to issue a prospectus each time it accesses the capital market. It leads to unnecessary repetition for a company that makes more than one offer of securities in a year to raise funds from the public. A way out is 'shelf prospectus' which remains valid (on the shelf) for a specified time period during which offers for securities may be made by a company to the public without going through the arduous exercise of issuing fresh prospectus every time.

The concept of shelf prospectus was introduced into Indian Corporate Law in 2000. By the 2000 Amendment of the Companies Act, 1956 under Section 60(A), the filing of shelf prospectus was made mandatory for public financial institutions, public sector banks, and scheduled banks whose main object is financing.

A company filing a shelf prospectus shall be required to file an information memorandum on all material facts relating to new charges created, changes in the financial position as have occurred between the, previous offer of securities and the succeeding offer of securities under the shelf prospectus.

An information memorandum shall be issued to the public along with shelf prospectus filed at the stage of the first offer of securities and such prospectus shall be valid for period of one year from the date of opening of the first issue of securities under that prospectus.

 Red Herring Prospectus (RHP)

 According to Section 32 of the Act, the RHP means a prospectus that does not have complete particulars on the price of the securities offered and quantum of securities to be issued. Thus RHP is an incomplete prospectus. A company may issue an RHP prior to the issue of a prospectus.The company shall file RHP with the ROC at least three days prior to the opening of the subscription list and the offer. The RHP carries the same obligations as are applicable to a prospectus and any variation between the RHP and a prospectus shall be highlighted as variations in the prospectus.After the closing of the offer details a final prospectus, stating therein the total capital raised and the closing price of the securities as also other as were not complete in the red hearing prospectus are to be filed with the ROC and also with SEBI.