Section 33 of Companies Act, 2013: Issue of Application Forms for Securities

Section 33 of the Companies Act, 2013 regulates the issue of application forms for the purchase of securities of a company. Its principal requirement is that an application form for securities offered to the public must ordinarily be accompanied by an abridged prospectus.

What is Section 33 of the Companies Act, 2013?

Section 33 forms part of Chapter III of the Companies Act, 2013 dealing with prospectus and allotment of securities. The provision is intended to ensure that a person receiving an application form in connection with a public offer also receives the essential information contained in an abridged prospectus.

The expression "abridged prospectus" is defined in Section 2 of the Companies Act, 2013. Broadly, it means a memorandum containing the salient features of a prospectus as specified by the Securities and Exchange Board of India by regulations.

Section 33 - Issue of Application Forms for Securities

Meaning of Abridged Prospectus

An abridged prospectus is a shorter disclosure document containing the salient features of the full prospectus. It enables an investor to receive important information relating to the securities and the offer without requiring the complete prospectus to accompany every application form.

The abridged prospectus should not be confused with the full prospectus. Section 33(2) separately protects an applicant's right to obtain a copy of the full prospectus on request before the subscription list and offer close.

When is an Abridged Prospectus Required?

The requirement under Section 33(1) applies when an application form is issued for the purchase of securities in circumstances covered by the provision, particularly a public offer. The application form should therefore be accompanied by the prescribed abridged prospectus unless one of the statutory exceptions applies.

Exceptions under Section 33(1)

1. Bona fide underwriting invitation

An abridged prospectus is not required where the application form is issued in connection with a bona fide invitation to a person to enter into an underwriting agreement concerning the securities.

2. Securities not offered to the public

The requirement also does not apply where the relevant securities are not offered to the public. The nature and method of the particular offer must, however, comply with the other applicable provisions of the Companies Act, 2013 and the rules or securities regulations governing that offer.

Right to Obtain the Full Prospectus

Section 33(2) gives a person the right to request the full prospectus before the closing of the subscription list and the offer. When such a request is made within that period, a copy of the prospectus must be furnished to the person.

Penalty for Non-compliance with Section 33

Under Section 33(3), if a company defaults in complying with the requirements of the section, the company is liable to a penalty of Rs. 50,000 for each default.

Key Compliance Points

• Determine whether the securities are being offered to the public.
• Where Section 33 applies, ensure that the application form is accompanied by the applicable abridged prospectus.
• Check whether the transaction falls within either statutory exception in Section 33(1).
• Maintain a mechanism for supplying the full prospectus when requested before the subscription list and offer close.
• Consider Section 33 together with the other applicable provisions of Chapter III of the Companies Act, the relevant rules and, where applicable, SEBI regulations.

Related Companies Act Provisions

Section 33 should be read with the surrounding provisions governing public offers and prospectuses, including Section 23 - Public Offer and Private Placement, Section 26 - Matters to be Stated in Prospectus, Section 30 - Advertisement of Prospectus, Section 31 - Shelf Prospectus, Section 32 - Red Herring Prospectus, Section 34 - Criminal Liability for Misstatements in Prospectus and Section 35 - Civil Liability for Misstatements in Prospectus.

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