Deemed Prospectus — Meaning, Best Example & Criteria 2021

The purpose of publishing a prospectus to the general public is to raise funds. However, there are 4 types of prospectus including Deemed Prospectus. We will discuss Deemed Prospectus in detail but first let’s understand what is Prospectus?

What is Prospectus?

It is a legal document that describes the firm’s stocks or equities that have been made available to the public. Any circular, advertisement, notification, or manuscript that serves the aim of seeking proposals from the general public for the buying of a firm’s equity or stocks serves as a document.

The purpose of publishing a prospectus to the general public is to raise funds. A prospectus provides investors with the required and complete information about the company ‘s shares that are being sold, allowing them to make informed decisions about investing in the firm’s shares.

It is essential for the issuing company to submit the prospectus with the regulator before raising the fund.

Deemed Prospectus

A deemed prospectus, as the name implies, is a document that is deemed to be a firm’s prospectus. In principle, a prospectus is any offer by a corporation to sell its stock to the public that is provided in the form of a detailed document directed to the public.

Section 25(1) of The Company’s Act defines a deemed prospectus as a form of prospectus. The idea of deemed prospectus is particularly relevant when a corporation wants to issue shares through an intermediary in order to avoid SEBI compliance standards.

Understanding Deemed Prospectus

A document of Offer for Sale is created whenever a firm allots or agrees to allot its shares or securities to an intermediary, including a merchant bank, another company, or an issuing house, for the intention of eventually offering those shares for sale.

A deemed prospectus is a document that serves as an offer for sale. If it meets either of the following two criteria:

Condition 1: The intermediary’s Offer for Sale to the Public was made within 6 months of the firm’s allotment of stocks to the intermediary;

The company that allotted its shares to the intermediary received no consideration for the stocks until the date the intermediary’s Offer for Sale was made.

Originally published at https://profitmust.com on October 23, 2021.