Section 25 of CA 2013 : Section 25: Document Containing Offer Of Securities For Sale To Be Deemed Prospectus

Explanation using Example

Imagine a tech startup, "InnovateX," which has developed a new type of smartwatch. InnovateX is a private company and decides to raise funds by allotting securities. Instead of directly offering these securities to the public, InnovateX allots them to an investment firm, "CapitalBoost," with the intention that CapitalBoost will offer these securities for sale to the public.

Within four months of the allotment, CapitalBoost creates a document offering the smartwatch securities to the public. This document, according to Section 25 of the Companies Act, 2013, is considered a prospectus issued by InnovateX. Therefore, InnovateX must ensure that this document includes all the necessary information required by law, such as the net amount received for the securities and where the contract for allotment can be inspected, just as if InnovateX had issued the prospectus directly.

If the document contains any misstatements, InnovateX could be held liable, just as they would be for a prospectus they issued themselves. Moreover, since CapitalBoost is a firm, the document can be signed by at least one-half of the partners to meet the legal requirements.