Prospectus refers to an information booklet or offer document on the basis of which an investor invests in the securities of an issuer company. There are different types of prospectus under The Companies Act, 2013. This article elaborates and gives information about Red Herring Prospectus.
Red Herring Prospectus
Red herring Prospectus however has been referred to mean a prospectus which does not include complete particulars of the quantum or price of the securities included therein. It contains most of the information pertaining to the company’s operations and prospects, but does not include key details of the issue such as its price and the number of shares offered.
(1) A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.
(2) A company proposing to issue a red herring prospectus under sub-section (1) shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer.
(3) It shall carry the same obligations as are applicable to a prospectus and any variation between the red herring prospectus and a prospectus shall thus highlighted as variations in the prospectus.
(4) Upon the closing of the offer of securities under this section, the prospectus stating therein the total capital raised, whether by way of debt or share capital, and the closing price of the securities and any other details as not included in the red herring prospectus shall then filed with the Registrar and the Securities and Exchange Board.
Explanation.—For the purposes of this section, the expression “red herring prospectus” means a prospectus which does not include complete particulars of the quantum or price of the securities included therein.