## Deemed Prospectus [Section 25]

When a company allots securities to a person (e.g., an issue house / intermediary) with a view that they will be offered to the public, the document by which the offer is made to the public is deemed to be a prospectus issued by the company. All prospectus provisions then apply.

### When is the allotment 'presumed' to be made for public offer?

It is presumed if either:

Securities are offered to the public within 6 months of allotment to the intermediary; OR
Full consideration has not been received by the company as on the date of the offer to public.

### Extra matters required in a deemed prospectus (in addition to Section 26)

Statement of net amount received by the company as consideration for the securities.
Names of the persons making the offer as directors of the company in the prospectus.
Time and place where the contract for allotment may be inspected.

### Signing

The deemed prospectus must be signed by two directors of the issuing person (intermediary), on the company's behalf.

### Notes

A rights issue to members where the offer can be renounced to others (if such others exceed 50 persons) is deemed to be an offer to the public.
If a person applies for shares on the basis of a document marked 'strictly private and confidential' sent by a company officer, it is not an offer to the public and the document is not a deemed prospectus. Any suit for compensation will be dismissed.

Worked example

### Example 1

Q. A Ltd. allots shares to an intermediary by private placement. The intermediary then offers them to the public (i) within 6 months of allotment, and (ii) after 8 months, but A Ltd. has not received full consideration as on the date of public offer. What is the status of the document used by the intermediary?

A. In both cases, under Section 25 the document used by the intermediary is treated as a deemed prospectus and the issue is a public offer by A Ltd. Case (i) triggers the 6-month presumption; case (ii) triggers the unpaid-consideration presumption.

⚠️ Common exam mistakes

Forgetting that the 6-month and 'full consideration not received' tests are independent — either one triggers deemed prospectus status.
Treating a renounceable rights issue to members as exempt — if renouncees exceed 50, it becomes a public offer.
Missing the requirement that the deemed prospectus must be signed by 2 directors of the offering person, not the issuer company.

Bare-Act text Section 25 · Companies Act, 2013 · click to expand

Where a company allots or agrees to allot any securities of the company with a view to all or any of those securities being offered for sale to the public, any document by which the offer for sale to the public is made shall, for all purposes, be deemed to be a prospectus issued by the company.

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