# Section 387 — Prospectus Conditions for Foreign Companies

## Context

When a company incorporated outside India wants to raise money from Indian investors by issuing securities, special protective provisions kick in. Section 387 deals with three protective rules around the prospectus and application forms.

## Key Provisions

### Section 387(2) — Waiver Condition is Void

Any condition in the prospectus or application that requires or binds the applicant to waive compliance with any statutory requirement under sub-section (1) is VOID.

Plain meaning: A foreign company cannot make the investor sign away their statutory protections. Any 'I agree to waive...' clause is automatically unenforceable.

### Section 387(3) — Application Form Must Accompany Prospectus

No person shall issue an application form for securities in India unless it is issued with a prospectus that:

Complies with the provisions of this Chapter, AND
Does not contravene Section 388.

Exception (Proviso): Does NOT apply if the application form was issued in connection with a bona fide invitation to enter into an underwriting agreement.

### Section 387(4) — Exemptions from this Section

This section does NOT apply to:

(a) Issue to existing members or debenture holders of a prospectus/application form (whether or not right of renunciation exists); AND
(b) Except for the dating requirement — issue of a prospectus relating to securities that are uniform with previously issued securities dealt in or quoted on a recognized stock exchange.

### Section 387(5) — Saving Clause

Nothing in this section limits or diminishes any other liability any person may incur under any other law in force in India or under this Act.

## Memory Hook

(2) Waiver = Void
(3) Application form must travel with prospectus (except underwriting)
(4) Existing members + uniform listed securities = exempt
(5) Other liabilities are preserved

Worked example

### Example 1

Example 1: ABC Ltd., incorporated in Singapore, issues a prospectus in India with a clause: 'Applicant agrees to waive any non-compliance with Indian disclosure norms.' — Result: This clause is VOID under Section 387(2). The applicant retains all statutory protections.

### Example 2

Example 2: XYZ Inc. (USA) issues application forms in India to underwriters as part of an underwriting agreement, without attaching a full prospectus. — Result: Permitted under the proviso to Section 387(3) — bona fide underwriting invitations are exempt.

### Example 3

Example 3: A foreign company issues a new tranche of equity shares to its existing Indian shareholders that are uniform with already-listed shares. — Result: Section 387 (except dating) does not apply under Section 387(4)(b).

⚠️ Common exam mistakes

Assuming Section 387(2) waiver clause is enforceable if voluntarily signed — it is statutorily VOID regardless of consent.
Forgetting the underwriting exception in Section 387(3) — application forms in genuine underwriting deals don't need a full prospectus attached.
Confusing the dating requirement carve-out: even uniform/listed securities exemption under 387(4)(b) DOES NOT exempt the prospectus dating requirement.
Believing Section 387(5) overrides other laws — it actually preserves all other liabilities.

Bare-Act text Section 387 · Companies Act, 2013 · click to expand

Section 387(2): Any condition requiring or binding an applicant for securities to waive compliance with any requirement imposed by virtue of sub-section (1) shall be void. Section 387(3): No person shall issue to any person in India a form of application for securities of such a company or intended company as is mentioned in sub-section (1), unless the form is issued with a prospectus which complies with the provisions of this Chapter and such issue does not contravene the provisions of section 388. Provided that this sub-section shall not apply if it is shown that the form of Application was issued in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to securities.

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Section 387 — Prospectus by Foreign Company: Waiver Clause and Application Form Requirements

Worked example

⚠️ Common exam mistakes