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Microlesson · 5-min read

Definition of Prospectus [Sec 2(70)]

# What is a Prospectus?

## Statutory Definition — Section 2(70)

A prospectus is any document described or issued as a prospectus and includes:

1. Red Herring Prospectus (RHP)

2. Shelf Prospectus

3. Any notice, circular, advertisement, or any other document that invites offers from the public to subscribe to or purchase securities of a body corporate — this is the Deemed Prospectus.

## Decoding the Definition

A document is a prospectus if any one of these three is true:

  • It is named as a prospectus; OR
  • It is issued as a prospectus; OR
  • It is any document inviting the public to subscribe/purchase securities (deemed prospectus).

## Key Element — Invitation to the Public

The essence of a prospectus is the invitation to the public. Without this element, a document is not a prospectus.

### What counts as 'Public'?

  • 'Public' includes even a limited class of people.
  • A document marked 'For private circulation only' offered to a group of people still counts as a prospectus.
  • A single private communication does not qualify — publicity is required.
  • Truly private and confidential documents are not subject to prospectus regulations unless made public.

## Three Faces of a Prospectus

TypePurpose
Red Herring ProspectusFiled before final pricing/quantity decision
Shelf ProspectusOne-time filing for multiple offers over time
Deemed ProspectusOffer for sale by third parties treated as company's prospectus

Worked example

### Example 1

Example: A company issues a brochure marked 'For private circulation only' to about 200 selected investors inviting them to subscribe to shares. Is this a prospectus?

Answer: Yes. Even if marked private, since it invites a class of persons (200 people) to subscribe, it qualifies as a prospectus under Sec 2(70) read with the deemed prospectus principle.

⚠️ Common exam mistakes

  • Thinking that documents labelled 'private and confidential' automatically escape prospectus regulation.
  • Forgetting that 'public' includes a limited class of people.
  • Treating only the formal final prospectus as a 'prospectus' — RHP and shelf prospectus are equally covered.
Bare-Act text Section 2(70) · Companies Act, 2013 · click to expand
Section 2(70): 'prospectus' means any document described or issued as a prospectus and includes a red herring prospectus referred to in section 32 or shelf prospectus referred to in section 31 or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.
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