Companies Act Section 387

Companies Act, Section 387: Dating of Prospectus and Particulars to be Contained Therein (Foreign Companies)

Section 387 of the Companies Act, 2013, lays down the requirements for the issuance, circulation, and distribution of prospectuses in India by or on behalf of companies incorporated, or to be incorporated, outside India. The provision ensures that any prospectus inviting Indian investors to subscribe to securities of such foreign companies is transparent, complete, and compliant with Indian law.

This section applies regardless of whether the foreign company has already established, or intends to establish, a place of business in India. The purpose is to protect investors in India by ensuring that foreign companies provide adequate disclosures before seeking investments.

1. Prospectus to Be Dated, Signed, and Contain Specified Particulars

No person is permitted to issue, circulate, or distribute in India any prospectus offering to subscribe for securities of a foreign company unless the prospectus:

It is dated and signed, thereby giving it authenticity and fixing responsibility on its issuers, and contains specific particulars relating to the company. These include:
(a) Particulars relating to the constitution and incorporation of the company:

The instrument constituting or defining the constitution of the company (e.g., the charter, memorandum, or articles of association).
The enactments or provisions under which the incorporation was effected, i.e., the laws or statutes of the foreign jurisdiction where the company is incorporated.
An address in India where such instruments, enactments, or provisions (or certified copies thereof), can be inspected. If these documents are not in the English language, a certified translation into English must also be provided.
The date and country of incorporation of the company, making clear its legal identity and origin. Whether the company has established a place of business in India, and if yes, the address of its principal office in India.
(b) Matters specified under Section 26:
The prospectus must also comply with the general disclosure requirements applicable to Indian companies under Section 26 of the Act, which include matters such as the company’s business, management, financial statements, risk factors, and other prescribed information.

This balances investor protection with practicality, as very old incorporation documents may be less relevant after a company has been in business for several years.

2. Waiver of Compliance Prohibited

Requires or binds an applicant for securities to waive compliance with the disclosure requirements in subsection (1), or purports to treat the applicant as having constructive notice of any contract, document, or matter not specifically referred to in the prospectus, shall be void.

This ensures that investors are fully informed through the prospectus itself and are not deprived of their rights by hidden terms, disclaimers, or vague references to external documents.

3. Application Forms Must Be Accompanied by a Compliant Prospectus

No person is permitted to issue in India any form of application for securities of a foreign company (whether incorporated or yet to be incorporated) unless:

The form is issued along with a prospectus that complies with the requirements of this Chapter, and the issue of the form does not contravene the provisions of Section 388 (which deals with expert consent and restrictions on prospectus contents).
Thus, application forms for securities cannot be circulated independently, ensuring that potential investors always have access to the full disclosures contained in the prospectus.

4. Exceptions to the Applicability of This Section

(a) To the issue of a prospectus or application form relating to securities of a company issued exclusively to its existing members or debenture holders. This remains true whether or not the applicants for securities have the right to renounce their entitlement in favor of other persons.

(b) Except for the requirement that a prospectus must be dated, the section does not apply to a prospectus relating to securities that are uniform with securities previously issued and which are already listed or dealt in on a recognized stock exchange.

However, subject to the above exceptions, the section applies to all prospectuses and application forms whether issued at the time of the company’s formation or at any later stage.

5. Liability Not Limited

Nothing in this section shall limit or reduce any liability that a person may incur:

Under any other law in force in India, or under any other provisions of the Companies Act, 2013, apart from this section.
This subsection ensures that issuers, directors, promoters, and other responsible persons remain fully liable for misstatements, fraud, or non-compliance in relation to the issue of securities, even beyond the obligations of Section 387.