Section 32 of the Companies Act, 2013
Section 32 of the Companies Act, 2013 relates to:
Red herring prospectus
Here is a detailed explanation of Section 32:
🔷 Section 32 – Red Herring Prospectus
Meaning:
A Red Herring Prospectus (RHP) is a prospectus that does not include complete details of the price or quantity of securities being offered. It is usually filed before the issue opens, especially in book-building issues.
Filing with Registrar:
A company proposing to make a public offer may issue a Red Herring Prospectus before the actual prospectus.
It must be filed with the Registrar at least 3 days before opening the offer.
Compliance Requirements:
The RHP must comply with the provisions of Section 26 (which prescribes the content of a prospectus).
After the offer is closed, a final prospectus (including the price and number of securities) must be filed with the ROC and SEBI (if applicable).
Deemed as a Prospectus:
The Red Herring Prospectus is treated as a prospectus for legal purposes, meaning all liabilities for misstatements or omissions apply similarly.
📝 Key Terms:
Red Herring Prospectus: A preliminary prospectus with details about the company but without the price/number of shares.
Used in Book-Building: Common in IPOs where investor demand is used to determine the final price.
📌 Example:
If a company is making an IPO through the book-building route, it will first file a Red Herring Prospectus. Later, after collecting bids and determining the final price, it will file the final prospectus.
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