Last Updated on Feb 7, 2022 by Manonmayi
To make disclosures even easier to understand, the markets regulator SEBI has introduced a new structure for disclosures in shortened (abridged) prospectuses, in which critical information will be supplied on the first page of the offer document. Every application form for the acquisition of a company’s stocks must be accompanied by an abridged prospectus, according to the requirements.
SEBI stated in a circular that after assessing the disclosure requirement, it was determined that the look and text on the main page looked cluttered due to a large amount of information that was required to be disclosed.
On the first page of the revised prospectus, a company will have to reveal the name of the promoter, details of the public (offering types of issue, fresh issue and offer for sale (OFS) component, total issue size), and reservations information (DRHP or RHP).
In addition, the company is obligated to provide information regarding the OFS held by the promoter, promoter group, and other shareholders. Under the amended structure, the business will have to publish the price band and minimum bid lot in the abridged prospectus incorporating key characteristics of the Red Herring Prospectus (RHP).
The issuing corporation must also publish estimated timetables for the opening and closing of the issue, the start of refunds, the credit of equity shares to allottees’ demat accounts, and the start of trading of equity shares, among other things. The revised format is part of SEBI’s effort to simplify, clarify, and standardise disclosures across numerous documents, as well as to offer extra but relevant information in the abridged prospectus.
The abridged prospectus will be made accessible on the website of the issuing company, lead managers, and registrar to issuers, and a link to download the prospectus must be included in the price band advertisement. The issuing company and merchant bankers (MBs) must ensure that the disclosures in the abridged prospectus are adequate, correct, and free of any misleading or false information.
In addition, the issuing company/MBs must verify that the qualitative statements in the abridged prospectus are backed up by Key Performance Indicators (KPIs) and other quantitative variables. Furthermore, no qualitative statement shall be made that cannot be supported by KPIs.
They will also have to include a Quick Response (QR) code on the front page of the documents they feel appropriate, such as the front outer cover page, abridged prospectus, price band advertisement, and so on.
The prospectus, abridged prospectus, and price band advertising will be downloaded if the QR code is scanned. All issues opening after 4 February 2022 will be subject to the new framework.
