Section 27 of Companies Act, 2013 – Variation In Terms Of Contract or Objects in Prospectus

SECTION 27. VARIATION IN TERMS OF CONTRACT OR OBJECTS IN PROSPECTUS

[Effective from 1st April, 2014]

(1) A company shall not, at any time, vary the terms of a contract referred to in the prospectus or objects for which the prospectus was issued, except subject to the approval of, or except subject to an authority given by the company in general meeting by way of special resolution:

Provided that the details, as may be prescribed, of the notice in respect of such resolution to shareholders, shall also be published in the newspapers (one in English and one in vernacular language) in the city where the registered office of the company is situated indicating clearly the justification for such variation:

Provided further that such company shall not use any amount raised by it through prospectus for buying, trading or otherwise dealing in equity shares of any other listed company.

(2) The dissenting shareholders being those shareholders who have not agreed to the proposal to vary the terms of contracts or objects referred to in the prospectus, shall be given an exit offer by promoters or controlling shareholders at such exit price, and in such manner and conditions as may be specified by the Securities and Exchange Board by making regulations in this behalf.

Applicable Rules

Companies (Prospectus and Allotment of Securities) Rules, 2014

[Effective from 1st April, 2014]

Rule 7. Variation in terms of contracts referred to in the prospectus or objects for which prospectus was issued.—(1) where the company has raised money from public through prospectus and has any unutilized amount out of the money so raised, it shall not vary the terms of contracts referred to in the prospectus or objects for which the prospectus was issued except by passing a special resolution through postal ballot and the notice of the proposed special resolution shall contain the following particulars, namely:—

(a) the original purpose or object of the Issue;

(b) the total money raised;

(c) the money utilised for the objects of the company stated in the prospectus;

(d) the extent of achievement of proposed objects (that is fifty percent, sixty percent, etc);

(e) the unutilised amount out of the money so raised through prospectus,

(f) the particulars of the proposed variation in the terms of contracts referred to in the prospectus or objects for which prospectus was issued;

(g) the reason and justification for seeking variation;

(h) the proposed time limit within which the proposed varied objects would be achieved;

(i) the clause-wise details as specified in sub-rule (3) of rule 3 as was required with respect to the originally proposed objects of the issue;

(j) the risk factors pertaining to the new objects; and

(k) the other relevant information which is necessary for the members to take an informed decision on the proposed resolution.

(2) The advertisement of the notice for getting the resolution passed for varying the terms of any contract referred to in the prospectus or altering the objects for which the prospectus was issued, shall be in Form PAS-1 and such advertisement shall be published simultaneously with dispatch of Postal Ballot Notices to Shareholders.

(3) The notice shall also be placed on the web-site of the company, if any.