When a public company wants to raise money from the public, it issues a prospectus — essentially a formal invitation to invest. Section 26 is the rulebook for what that prospectus must contain and how it must be prepared. Think of it as the 'quality check' before a company can legally ask you to invest your hard-earned ₹.
Every prospectus must be dated and signed, and must disclose information and financial reports as SEBI specifies (in consultation with the Central Government). Until SEBI issues fresh specifications, existing SEBI regulations under the SEBI Act, 1992 continue to apply. Critically, the prospectus must carry a compliance declaration — a statement that nothing in it contradicts the Companies Act 2013, the Securities Contracts (Regulation) Act 1956, or the SEBI Act 1992. Before publication, a signed copy must be filed with the Registrar of Companies (ROC), signed by every named director or their authorised attorney. Once filed, the prospectus must state on its face that the copy has been so delivered. The prospectus becomes invalid if issued more than 90 days after the date of filing with the ROC — this 90-day window is a favourite exam number.
Section 26 also covers expert statements in a prospectus (e.g., a valuer's report or auditor's certificate). The expert must be genuinely independent — not engaged in, or interested in, the company's formation, promotion, or management. They must give written consent to inclusion of their statement, and that consent must not be withdrawn before filing. The prospectus must explicitly state that such consent was obtained. Two situations are exempt from Section 26(1): (a) prospectuses issued to existing members or debenture-holders (e.g., a rights issue circular), and (b) prospectuses for shares/debentures that are uniform with already-listed securities. Penalty for non-compliance: the company and every person knowingly involved face a fine of ₹50,000 to ₹3,00,000 each.
📊 Worked example
Example 1 — The 90-Day Validity Trap
Rajesh & Co. Pvt. Ltd. is converting to a public company and plans an IPO. It files its prospectus with the ROC on 1st January 2025.
| Event | Date |
|---|---|
| Filed with ROC | 1 Jan 2025 |
| Last valid date for issue | 1 Apr 2025 (90 days later) |
| Actual issue date | 5 Apr 2025 |
Working: 1 Jan + 90 days = 1 April 2025. The company issued on 5 April — 5 days after expiry.
Answer: The prospectus is invalid under Section 26(8). The company must re-file a fresh copy with the ROC and restart the 90-day clock. Any allotment made on this prospectus would be irregular.
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Example 2 — Penalty Calculation
Ms. Iyer is the CFO of Starlight Infra Ltd. She knowingly signs off on a prospectus that omits the mandatory compliance declaration under Section 26(1)(c). The ROC discovers this after issue.
Who is liable?
- Starlight Infra Ltd. (the company): fine between ₹50,000 and ₹3,00,000
- Ms. Iyer (knowingly a party): fine between ₹50,000 and ₹3,00,000
Answer: Both the company AND Ms. Iyer face independent penalties. If the adjudicating officer imposes the maximum on both: ₹3,00,000 + ₹3,00,000 = ₹6,00,000 total. Note — this is not a criminal imprisonment provision, only a monetary fine.
⚠️ Common exam mistakes
- Students think 'dated' means the date it's printed. Wrong — Section 26 clarifies via Explanation that the date on the prospectus is deemed to be the date of publication, not printing. These can differ.
- Confusing the 90-day rule's starting point. Many students count 90 days from the date of signing or printing. The clock starts from the date of filing with the ROC, not any earlier event.
- Assuming all expert statements are automatically valid. Don't just check if an expert signed — confirm the expert is independent (not involved in formation/promotion/management) and gave written consent that wasn't later withdrawn. If either condition fails, the statement cannot appear.
- Missing the exemption for rights issues. Students sometimes apply Section 26 requirements to a circular sent to existing shareholders for a rights issue. Sub-section (2)(a) exempts these — the full Section 26(1) disclosure requirements do NOT apply to rights issue offer letters.
- Treating the penalty as applicable only to the company. The fine hits both the company and every individual knowingly a party to the non-compliant prospectus — directors, CFOs, promoters. Each person faces ₹50,000–₹3,00,000 separately.
📖 Bare Act text — Section 26, Companies Act 2013
(click to expand)
(1) Every prospectus issued by or on behalf of a public company either with reference to its formation or subsequently, or by or on behalf of any person who is or has been engaged or interested in the formation of a public company, shall be dated and signed and shall, state such information and set out such reports on financial information as may be specified by the Securities and Exchange Board in consultation with the Central Government:Provided that until the Securities and Exchange Board specifies the information and reports on financial information under this sub-section, the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992 (15 of 1992), in respect of such financial information or reports on financial information shall apply;(c) make a declaration about the compliance of the provisions of this Act and a statement to the effect that nothing in the prospectus is contrary to the provisions of this Act, the Securities Contracts (Regulation) Act, 1956 (42 of 1956) and the Securities and Exchange Board of India Act, 1992 (15 of 1992) and the rules and regulations made thereunder;(2) Nothing in sub-section (1) shall apply—(a) to the issue to existing members or debenture-holders of a company, of a prospectus or form of application relating to shares in or debentures of the company, whether an applicant has a right to renounce the shares or not under sub-clause (ii) of clause (a) of sub-section (1) of section 62 in favour of any other person; or(b) to the issue of a prospectus or form of application relating to shares or debentures which are, or are to be, in all respects uniform with shares or debentures previously issued and for the time being dealt in or quoted on a recognised stock exchange.(3) Subject to sub-section (2), the provisions of sub-section (1) shall apply to a prospectus or a form of application, whether issued on or with reference to the formation of a company or subsequently.Explanation.—The date indicated in the prospectus shall be deemed to be the date of its publication.(4) No prospectus shall be issued by or on behalf of a company or in relation to an intended company unless on or before the date of its publication, there has been delivered to the Registrar for filing, a copy thereof signed by every person who is named there in as a director or proposed director of the company or by his duly authorised attorney.(5) A prospectus issued under sub-section (1) shall not include a statement purporting to be made by an expert unless the expert is a person who is not, and has not been, engaged or interested in the formation or promotion or management, of the company and has given his written consent to the issue of the prospectus and has not withdrawn such consent before the delivery of a copy of the prospectus to the Registrar for filing and a statement to that effect shall be included in the prospectus.(6) Every prospectus issued under sub-section (1) shall, on the face of it,—(a) state that a copy has been delivered for filing to the Registrar as required under sub-section (4); and(b) specify any documents required by this section to be attached to the copy so delivered or refer to statements included in the prospectus which specify these documents.(8) No prospectus shall be valid if it is issued more than ninety days after the date on which a copy thereof is delivered to the Registrar under sub-section (4).(9) If a prospectus is issued in contravention of the provisions of this section, the company shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees and every person who is knowingly a party to the issue of such prospectus shall be punishable with fine which shall not be less than fifty thousand rupees but which may extend to three lakh rupees.
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