## Variation in Terms of Contract or Objects in Prospectus [Section 27]

Money raised through a prospectus carries an investor expectation about how it will be used. Section 27 lets the company change those terms or objects only with strong shareholder safeguards.

### Procedure for variation

1. Pass a Special Resolution through postal ballot.

2. Notice of meeting must be placed on the company's website.

3. Details of the notice and justification for variation must be published in one English and one vernacular language newspaper (where the registered office is situated), in Form PAS-1.

4. Dissenting shareholders must be given an exit offer by the promoters/controlling shareholders at an exit price specified by SEBI.

### Hard restriction

The variation cannot be used to deploy prospectus proceeds for buying, trading or otherwise dealing in equity shares of any other listed company.

Worked example

### Example 1

Q. ABC Ltd. raised ₹200 crore through an IPO for setting up a manufacturing plant. Now the Board wants to redeploy ₹50 crore into buying shares of another listed company XYZ Ltd. Can it do so by passing a special resolution under Section 27?

A. No. The proviso to Section 27 expressly prohibits variation that uses prospectus proceeds for buying/trading equity shares of any other listed company. The variation is not permissible even with shareholder approval.

⚠️ Common exam mistakes

Passing an ordinary resolution or doing it through a physical meeting — Section 27 requires a special resolution via postal ballot.
Skipping the dissenting shareholders' exit offer.
Trying to redeploy IPO funds into shares of other listed companies — this is a hard prohibition.

Bare-Act text Section 27 · Companies Act, 2013 · click to expand

A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, except subject to the approval of, or except subject to an authority given by the company in general meeting by way of special resolution...

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