Q.What is a deemed prospectus? Explain with an example.

Companies sometimes route a public offer through an intermediary instead of approaching investors directly, and the law is careful not to let that arrangement escape prospectus discipline.

Section 25 of the Companies Act, 2013 addresses a specific way a company might otherwise sidestep the discipline of Section 26. Instead of inviting the public directly, a company allots or agrees to allot its securities to an issuing house, merchant banker or similar intermediary, on the understanding - whether express or inferred from the circumstances of the allotment - that the intermediary will, in turn, offer those securities to the general public. If the company had made that public offer itself, it would have had to issue a proper prospectus, satisfying every disclosure requirement of Section 26 and registering it with the Registrar of Companies before issue.

To prevent this obligation from being avoided merely by inserting an intermediary between the company and the public, Section 25 provides that the document by which the intermediary makes its offer to the public is deemed to be a prospectus issued by the company itself, and must comply with the same disclosure and registration requirements as an ordinary prospectus. …

A frequent error is confusing a deemed prospectus with an abridged prospectus - a deemed prospectus is about who makes the offer (an intermediary instea …