Share application form to accompany abridged prospectus - Companies Law - Circular : No. 1 of 1992,

Circular : No. 1 of 1992, dated 9 ‑ 1 ‑ 1992. Subject:- Share application form to accompany abridged prospectus In terms of section 56(3) of the Companies Act, 1956, no one shall issue any form of application for shares/debentures of a company unless the form is accompanied by a memorandum containing such salient features of a prospectus as may be prescribed. The Government have recently revised the format of this memorandum (abridged prospectus) to provide for greater disclosure of information to prospective investors so as to enable them to take an informed decision regarding investment in shares and debentures. It has, however, come to the notice of this Department that share/debenture application forms are being circulated by companies without complying with the legal requirements of section 56(3) of the Act. As a result the investors have no information when they are given only application forms. In order to ensure compliance with the provisions of law, you are requested to advise your constituent member companies that the share application form should be a part of the abridged prospectus, being attached to it along a perforated line. The abridged prospectus and the share application form should bear the same printed number. The investor may detach the share application form along the perforated line after he has had an opportunity to study the contents of the abridged prospectus, before submitting the same to the company or its designated bankers. The same procedure be also followed while making available copies of the prospectus under section 56 of the Act. In this connection, it may be pointed out that contravention of the provisions of section 56(3) is punishable with fine which may extend to Rs. 5,000. The Registrars of Companies are being advised to ensure strict compliance with these provisions of law and file necessary prosecution, in cases of default.