Section 27 of the Companies Act, 2013
Section 27 of the Companies Act, 2013 deals with the "Variation in terms of contract or objects in prospectus".
📘 Section 27 – Variation in terms of contract or objects in prospectus
This section applies when a company has raised money from the public through a prospectus and wants to change the use of those funds from what was originally stated.
🔍 Key Provisions:
Alteration of terms or objects:
If a company has raised funds from the public via a prospectus and wants to change the purpose (object) for which the money was raised, it must:
Pass a special resolution in a general meeting.
The notice of the meeting should clearly state the justification for the variation.
Disclosure in the notice:
The notice of the resolution must contain:
The original object of the issue.
The proposed variation.
The justification for such variation.
The details of how the unutilized money will be used after the variation.
Dissenting shareholders:
If any shareholder does not agree with the change, they must be given an exit opportunity by the promoters or controlling shareholders, in accordance with SEBI regulations.
Filing with ROC:
A copy of the special resolution must be filed with the Registrar of Companies (ROC).
⚠️ Purpose:
To protect the interest of investors, especially in cases where the company wants to change the end-use of funds raised from the public.
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