Information Memorandum means a process undertaken prior to the filing of a prospectus by which a demand for the securities proposed to be issued by a company is elicited, and the price and the terms of issue for such securities is assessed, by means of a notice, circular, advertisement or document [section 2(19B)]
Provision: [section 60B]
The provisions under section 60B, in this regard, may be noted as follows:
- A public company making an issue of securities may circulate information Memorandum to the public prior to filing of prospectus.
- The company is required to file a prospectus prior to the opening of the subscription list and the offer as a red-herring prospectus at least 3 days before opening of offer.
A red-herring prospectus is a prospectus, which does not have complete particulars on the price of securities offered and quantum of securities offered.
- The information Memorandum and red-herring prospectus shall carry same obligation as are applicable in the case of a prospectus.
- Every variation between the information Memorandum and the red-herring prospectus shall be highlighted by the issuing company and shall be individually intimated to the persons invited to subscribe to the issue of securities.
- If the issuing company or the underwriters to the issue have invited or received advance subscription by way of cash or post-dated cheques or stock-invest, the company or such underwriters or bankers to the issue shall not encash such subscription moneys or post-dated, cheques or stock-invest before the date of opening of the issue, without having individually intimated the prospective subscribers of the variation and without having offered an opportunity to such prospective subscribers to withdraw their application and cancel their post-dated cheques or stock-invest or return of subscription paid.
- If a company or underwriter or banker to the issue acts contrary to the aforesaid stipulation, such action shall be void and the applicant shall be entitled to receive a refund of his post-dated cheques or stock-invests or subscription monies on cancellation of application. The applicants are entitled to receive back their original application money and interest at the rate of 15% p.a. from the date of encashment till payment of realization.
- The applicant or proposed subscriber shall exercise his right to withdraw from the application on any information on any intimation of verification within 7 days from the date of such intimation and shall indicate such withdrawals in writing to the company and the underwriters.
- Once the offer for securities is closed, a final prospectus stating therein the total capital raised whether by way of debt or share capital, the closing price of the securities and any other details which are not complete in the red-herring prospectus shall be filed with the Registrar of Companies as well as SEBI, in the case of listed public company and in any other case with Registrar of Companies only.
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