Analysis of Section 32 of Companies Act
The “Red Herring” prospectus is a preliminary prospectus that does not contain the final offering price or the number of securities being offered along with it provides key information about the company and the proposed offering that allows investors to make informed decisions.
- Mandatory Contents to be included in Red Herring Prospectus: RHP shall contain all mandatory information regarding the company, its promoters, objects of the issue, risk factors, financial statements, and other relevant details to ensure transparency. The intent is it help investors analyse the risk of the investment opportunity.
- RHP Filing Requirements: Companies are required to file the RHP with the Registrar of Companies (RoC) and the Securities and Exchange Board of India (SEBI) before making a public offer of securities. To avoid penalties and legal actions compliance with the filing requirement is important.
- Limitation on RHP Amendments: Once RHP filed with the RoC and SEBI, any changes to the RHP are subject to strict scrutiny. Section 32 has prescribed limitations on the extent to which companies may modify the contents of the RHP only after its filing. Any changes made in RHP must be duly disclosed to investors to maintain transparency and integrity.
