SEBI revises disclosure format for abridged prospectus

Ashish M. Shaji

10 Feb, 2022

Capital markets regulator Securities Exchange Board of India vide circular SEBI/HO/CFD/SSEP/CIR/P/2022/14 revised the format of abridged prospectus. This change was made to simplify and ensure greater clarity and consistency in the disclosure in the front page of the offer document. This circular was issued to all recognized stock exchanges, recognized depositories, issuer companies, merchant bankers and brokers, registrars to an issue. 

What is an abridged prospectus?

It refers to a memorandum with salient features of a prospectus as may be specified by Securities Exchange Board of India by drafting regulations on this behalf. A prospectus is a document through which the company communicates and invites public to invest into it or buy their securities. A prospectus contains information on the financial position of the company, the objects of public offer, names of the signatories to the memorandum etc.

As per the companies act, every application form for the purchase of a company’s securities should be accompanied by this kind of prospectus.

Disclosure Requirements

According to the revised format, a company needs to disclose the following:

• Name of the promoter;
• Details of the offer to public– types of issue, fresh issue and offer for sale (OFS)component, total issue size;
• Share reservation details on the front page of the abridged prospectus;
• Disclosure on details regarding OFS by promoter, promoter group and other shareholders;
• In the abridged prospectus having the salient features of the red herring prospectus, the company need to disclose price band and minimum bid lot;
• The issuer company also needs to disclose-

1. indicative timelines for opening & closing of the issue;
2. initiation of refunds;
3. credit of equity shares to demat accounts of allottees & commencement of trading of equity shares, among others.

• The issuer company needs to insert a Quick Response (QR) code on the front page of the documents like front outside cover page, abridged prospectus, price band advertisement, etc., as deemed fit by them. By scanning the QR code, these can be downloaded- prospectus, abridged prospectus and price band advertisement as applicable.

General Instructions- Revised disclosure format for abridged prospectus

• This SEBI circular on Disclosure in the abridged prospectus shall be applicable for all issues opening after the release of this circular.
• SEBI said that a copy of such prospectus would be made available on the website of-

1. Issuer company;
2. Lead managers;
3. Registrar to an issuers.

• The link to download this prospectus would be provided in the price band advertisement.
• Further, the issuer company/merchant bankers need to ensure that the disclosures made in the abridged prospectus are accurate, adequate and it should not contain any misleading or misstatement.
• Moreover, the issuer company/merchant bankers should also ensure that the qualitative statements contained in the abridged prospectus is substantiated with key performance indicators and other quantitative factors. SEBI^[1] has cautioned that no qualitative statement should be made that cannot be substantiated with key performance indicators.

Why has SEBI come out with new disclosure format for abridged prospectus?

SEBI remarked in its circular that with a view to simplify, provide greater clarity and consistency in the disclosures across documents and also to provide additional yet critical information in the said prospectus, the disclosure format has been revised.

Conclusion

This circular shall be applicable for all issues with immediate effect, said SEBI. SEBI expects this move to usher in greater clarity and transparency as critical information will be available on the front page of the offer document.

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