Section 26 of the Companies Act, 2013: Matters to be Stated in a Prospectus

Section 26 governs the statutory contents and formal requirements of a prospectus issued by or on behalf of a public company. The section works together with the applicable Securities and Exchange Board of India (SEBI) regulations governing disclosures in offer documents.

Current legal position: Section 26(1), as amended, requires the prospectus to state the information and financial reports specified by SEBI in consultation with the Central Government. For public issues, the applicable SEBI disclosure framework must therefore be read with the Companies Act, 2013.
Prospectus must be
Dated and signed.
Regulatory filing
A signed copy must be delivered to the Registrar for filing on or before publication.
Expert statement
Requires an independent expert's written consent, subject to Section 26(5).
Validity
A prospectus is not valid if issued more than 90 days after delivery of its copy to the Registrar.

Meaning and scope of Section 26

A prospectus is the principal disclosure document through which a public company invites the public to subscribe for or purchase its securities. Section 26 sets statutory requirements intended to ensure that the document is properly authenticated, filed and supported by the disclosures required under securities law.

The provision applies to a prospectus issued by or on behalf of a public company, whether in connection with its formation or later, and also to a prospectus issued by or on behalf of a person who is or has been engaged or interested in the formation of the public company.

Section 26(1): Information and financial reports

Every prospectus covered by Section 26(1) must be dated and signed. It must state the information and set out the reports on financial information specified by SEBI in consultation with the Central Government.

The prospectus must also contain the statutory declaration of compliance and a statement that nothing in it is contrary to the Companies Act, 2013, the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, or the rules and regulations made under those enactments.

The detailed disclosure requirements for equity public issues are principally contained in the SEBI regulations page, including the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended. The precise requirements depend on the type of issue and security.

Section 26(2): Exemptions

The disclosure requirements in sub-section (1) do not apply in the circumstances specifically stated in sub-section (2), including:

Section 26(3): Application to prospectus and application forms

Subject to the exemptions in sub-section (2), sub-section (1) applies whether the prospectus or form of application is issued with reference to the formation of the company or subsequently. The date appearing on the prospectus is deemed to be its date of publication.

Section 26(4): Filing with the Registrar of Companies

No prospectus may be issued by or on behalf of a company, or in relation to an intended company, unless a copy is delivered to the Registrar for filing on or before its publication. The copy must be signed by every person named in it as a director or proposed director, or by that person's duly authorised attorney.

Section 26(5): Statements made by experts

A prospectus cannot include a statement purporting to be made by an expert unless the statutory conditions are satisfied. The expert must not be, or have been, engaged or interested in the formation, promotion or management of the company; must give written consent to the issue of the prospectus; and must not withdraw that consent before delivery of the prospectus to the Registrar. The prospectus must state that the required consent has been given and not withdrawn.

Section 26(6): Statements on the face of the prospectus

The prospectus must state on its face that a copy has been delivered to the Registrar for filing as required by sub-section (4). It must also specify the documents required to be attached to the filed copy, or refer to statements in the prospectus that identify those documents.

Section 26(8): 90-day validity rule

A prospectus is not valid if it is issued more than 90 days after the date on which its copy was delivered to the Registrar under Section 26(4). This makes timely issuance after filing a statutory requirement.

Section 26(9): Penalty for contravention

If a prospectus is issued in contravention of Section 26, the company is liable to a fine of not less than Rs. 50,000 and up to Rs. 3,00,000. A person who is knowingly a party to the issue of such a prospectus is likewise liable to a fine of not less than Rs. 50,000 and up to Rs. 3,00,000.

The imprisonment language formerly appearing in this provision was omitted by the Companies (Amendment) Act, 2020 with effect from 21 December 2020.

Important amendments to Section 26

SEBI disclosure framework and offer documents

For securities issues regulated by SEBI, Section 26 should not be read in isolation. SEBI's issue-specific regulations prescribe detailed disclosures, due-diligence requirements and filing procedures. The SEBI public issue filings portal provides access to draft offer documents, red herring documents and final offer documents. For debt securities, the applicable SEBI debt regulations and offer-document framework should also be checked.

Practical compliance checklist

Official legal resources

For the authoritative statutory text and the latest regulatory amendments, refer to India Code, the Ministry of Corporate Affairs and the Securities and Exchange Board of India.