Meaning of Abridged Prospectus
Section 2(1) of the Indian Companies Act, 201 defines an abridged prospectus as a memorandum that has all the salient features of the prospectus as specified by the SEBI.
Furthermore, a prospectus can be defined as a document that the company uses to communicate and invite the public to invest into it or purchase their securities. It contains exhaustive information about the financial position of the company, its directors and their details, the names of the signatories to the memorandum, the objects of public offer, additional charges created, changes in the finance etc.
Importance of an Abridged Prospectus
- It contains all the important details of the prospectus in less than five pages, giving an excellent summary to the prospectus.
- It is quick and easy to understand and saves the time of the investors.
- It helps the company fulfil a statutory mandate prior to accepting offers from the public. If the company fails to issue the abridged prospectus, then it will be charged Rs. 50,000 for each default.
- It saves the cost of public issue of capital.
- It gives a good understanding about the rights of the investors and the nature of investment that they are doing.
Essentials of an Abridged Prospectus
- Complete disclosure of relevant information such as name and logo of the issuer, details of the registered office, date of opening and closing of the issue, the process of price discovery in IPO, information about promoters and directors etc.
- It must be submitted to SEBI.
- It must be less than 5 pages in length.
- The sequence of contents (as in the prospectus) must not be changed.
