Write a short note on Deemed Prospectus.

Deemed Prospectus.

Section 25 provides that any document by which the offer for sale of shares or debentures to the public is made shall for all purposes be treated as prospectus. The document Offer for Sale is an invitation to the general public to purchase the shares of a company through an intermediary such as an issuing house or a merchant bank. A company may allot or agree to allot any shares or debentures to an ‘issue house without there being any intention on the part of the company to make shares or debentures available directly to the public through issue of prospectus. The issue house in turn makes an Offer for Sale to the public.

In order to constitute ‘Offer for Sale’, either of the two conditions must be satisfied.

  • Offer for Sale to the public was made within six months after the aliment or agreement to allot; or
  • At the date when the offer was made, the whole consideration to be received by the company in respect of the securities had not been received by it.

This section provides an exception to the issue of prospectus. Here, the company allots the shares to Issue House, which in turn makes an ‘Offer for Sale’ to the public. The document by which an ‘Offer for Sale’ is made by Issue House, although not being issued by the company, shall be deemed to be a prospectus issued by the company.

Compare items
  • Total (0)