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Microlesson · 5-min read

Prospectus of a Foreign Company — Section 387

# Prospectus of a Foreign Company — Section 387

## The rule — Section 387(1)

No person shall issue, circulate or distribute in India any prospectus offering to subscribe for securities of a company incorporated outside India, unless the prospectus is dated and signed and contains the particulars below.

## Part (a) — Specific particulars about the foreign company

#Particular
(i)The instrument constituting or defining the constitution of the company
(ii)The enactment under which the company was incorporated
(iii)Address in India where the said instrument/enactment (or copies, with certified English translation if not in English) can be inspected
(iv)The date and country of incorporation
(v)Whether the company has established a place of business in India, and if so, the address of its principal office in India

## Part (b) — General prospectus contents

The prospectus must state the matters specified under Section 26 (i.e., the standard Indian-company prospectus disclosures).

## Proviso — 2-year carve-out

Particulars (i), (ii) and (iii) of Part (a) shall not apply in the case of a prospectus issued more than 2 years after the date at which the company is entitled to commence business.

### Rationale

Once the foreign company has been operational for over 2 years, the market is presumed to have alternative access to its constitutional and statutory details — the heavy disclosure is dialled back to the date/country of incorporation (iv), Indian-office address (v), and the Section 26 disclosures.

## Reading the carve-out carefully

  • The carve-out drops only (i), (ii), (iii).
  • (iv), (v) and the Section 26 disclosures and the dating/signing requirement remain mandatory.

Worked example

### Example 1

Worked example: Orion plc (incorporated in the UK, entitled to commence business on 1 January 2020) issues a prospectus in India on 1 February 2023 inviting Indian subscribers. Analysis: More than 2 years have elapsed since 1 January 2020 → particulars (i)/(ii)/(iii) of S. 387(1)(a) are NOT required. The prospectus must still be dated and signed; disclose (iv) date/country of incorporation, (v) Indian principal office (if any); and contain all S. 26 matters.

⚠️ Common exam mistakes

  • Forgetting that the prospectus must be both dated AND signed — these are independent statutory requirements
  • Skipping Section 26 disclosures on the assumption that foreign-company prospectus rules are a complete code — they are in addition to Section 26
  • Misreading the 2-year carve-out as dropping all the (a) particulars — it drops only (i), (ii), (iii); (iv) and (v) remain
  • Computing the 2-year period from the date of incorporation instead of the date the company became entitled to commence business
  • Including translations only of the constitution but not certifying them — Section 387 requires certified English translation
Reference: Section 387 — Companies Act, 2013
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