Procedure for Variation in Terms of Contract or Objects in Prospectus

Introduction:

Prospectus is a legal document by which a company is entitled to raise money from public by means of initial public offer. Prospectus contains goals, objects and obligations of company when it issues securities to the public. Terms and conditions defined in a prospectus aligns the company’s action for utilization of funds raised from public which helps in ensuring transparency and accountability. Company which has raised funds from public through prospectus may vary terms and conditions defined in prospectus subject to the provisions of Section 27 of Companies Act, 2013 and rules provide therein.

Applicable Provisions:

1. Section 27, 96, 100, 173 of Companies Act, 2013
2. Rule 7 of Companies (Prospectus and Allotment of Securities) Rules, 2014
3. Rule 32 of Companies (Incorporation) Rules, 2014
4. Regulation 30, 44, 46 SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015
5. Regulation 157 of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018

Mandatory Requirements:

1. Authorization by the Articles of Association (AOA)
2. Shareholders/Members Approval by passing special resolution* in a duly convened general meeting, basis recommendations of the Board
3. Place notice of resolution on the web-site of the company, if any
4. Give exit opportunity to dissenting shareholders.

* Note:

1. In case a company has raised money from public through prospectus and has any unutilized amount out of the money so raised, it shall abstain to vary the terms of contracts referred to in the prospectus or objects for which the prospectus was issued except it shall be approved by the shareholders by passing a special resolution through postal ballot.
2. Company shall abstain to use any amount raised by it through prospectus for buying, trading or otherwise dealing in equity shares of any other listed company.

Procedure:

1. Convene a Meeting of Board of Directors for Approving the Variation in terms of Contract or Objects in Prospectus:
   1. The company shall pass a Board resolution in a duly convened board meeting, approving the proposal for variation in terms of Contract or Objects in Prospectus. [Please refer to the Procedure for Conducting Board Meeting for further details]
   2. Listed Company shall submit the disclosure of outcome of Board Meeting to the Stock Exchange within 30 minutes* from the date of the Board Meeting and post the same on the website of the Company within 2 working days.
      *Note – In case the meeting of the board of directors closes after normal trading hours of that day but more than 3 hours before the beginning of the normal trading hours of the next trading day, the listed entity shall disclose the decision pertaining to the event or information, within 3 hours from the closure of the board meeting.
2. Convene Extra Ordinary General Meeting:
   1. The company shall convene a General Meeting of its Members to pass an ordinary resolution for approving the proposal of variation in terms of Contract or Objects in Prospectus.
      Refer to the Procedure for Conducting General Meeting and in case of listed company Procedure for Passing of Resolution by Postal Ballot for a detailed procedure.
   2. Listed Entity shall disclose the proceeding of General Meeting to the Stock Exchange within 12 hours from the conclusion of General Meeting and same shall be posted on the website of the company within 2 working days. [Regulation 30 & 46(3) of the SEBI (LODR) Regulations, 2015]
   3. Listed Company shall submit details regarding the voting results to the Stock Exchanges within 2 working days of conclusion of its general meeting in the format specified by SEBI and forthwith post the same on the website of the Company. [Regulations 44 of the SEBI (LODR) Regulations, 2015]
3. Public Notice of Resolution:
   The company shall publish a notice of the resolution in Form PAS-1, concurrently with the dispatch of Postal Ballot Notices to shareholders, in at least one English newspaper and one vernacular newspaper that are circulated in the district where the company’s registered office is situated and same shall be placed on the web-site of the company, if any.
4. Filing Form MGT-14 with ROC:
   The company shall file the copy of Board Resolution and Ordinary Resolution passed in its duly convened Board meeting and General meeting in Form MGT-14 within 30 days of passing such resolution along with the requisite documents and fees, with the Registrar of Companies (ROC).
5. Exit Opportunity to Dissenting Shareholders:
   The promoters, or controlling shareholders of listed company shall provide an exit offer to dissenting shareholders as provided for in the Companies Act, 2013, in case of change in objects or variation in the terms of contract related to objects referred to in the offer document as per conditions and manner is provided in Schedule XX of SEBI (ICDR), Regulations.
6. File List of Dissenting Shareholders to the Stock Exchange:
   The company shall submit the list of dissenting shareholders, as certified by its compliance officer, to the stock exchange(s).
7. Appointment of Merchant Banker and Finalize the Exit Offer Price:
   The company shall appoint a merchant banker registered with the Board and finalize the exit offer price.
8. File Intimation of Exit Offer Price to the Stock Exchange:
   The company shall intimate the stock exchange(s) about the exit offer to dissenting shareholders and the price at which such offer is being given.

*Note: Notice of the Proposed Special Resolution Shall Contain the Following Particulars:

1. The original purpose or object of the Issue
2. The total money raised
3. The money utilized for the objects of the company stated in the prospectus;
4. The extent of achievement of proposed objects (that is fifty percent, sixty percent, etc.)
5. The unutilized amount out of the money so raised through prospectus,
6. The particulars of the proposed variation in the terms of contracts referred to in the prospectus or objects for which prospectus was issued
7. The reason and justification for seeking variation
8. The proposed time limit within which the proposed varied objects would be achieved
9. The clause-wise details as specified in rule 3(3) as was required with respect to the originally proposed objects of the issue
10. The risk factors pertaining to the new objects and
11. The other relevant information which is necessary for the members to take an informed decision on the proposed resolution.