1. No person shall issue, circulate or distribute in India any prospectus offering to subscribe for securities of a company incorporated or to be incorporated outside India, whether the company has or has not established, or when formed will or will not establish, a place of business in India, unless the prospectus is dated and signed, and—
a. contains particulars with respect to the following matters, namely:—
i. the instrument constituting or defining the constitution of the company;
ii. the enactments or provisions by or under which the incorporation of the company was effected;
iii. address in India where the said instrument, enactments or provisions, or copies thereof, and if the same are not in the English language, a certified translation thereof in the English language can be inspected;
iv. the date on which and the country in which the company would be or was incorporated; and
v. whether the company has established a place of business in India and, if so, the address of its principal office in India; and
b. states the matters specified under section 26:
Provided that: sub-clauses (i ), (ii ) and (iii ) of clause (a ) of this sub-section shall not apply in the case of a prospectus issued more than two years after the date at which the company is entitled to commence business.
2. Any condition requiring or binding an applicant for securities to waive compliance with any requirement imposed by virtue of sub-section (1 ), or purporting to impute him with notice of any contract, documents or matter not specifically referred to in the prospectus, shall be void.
3. No person shall issue to any person in India a form of application for securities of such a company or intended company as is mentioned in sub-section (1 ), unless the form is issued with a prospectus which complies with the provisions of this Chapter and such issue does not contravene the provisions of section 388:
Provided that: this sub-section shall not apply if it is shown that the form of application was issued in connection with a bona fide invitation to a person to enter into an underwriting agreement with respect to securities.
4. This section—
a. shall not apply to the issue to existing members or debenture holders of a company of a prospectus or form of application relating to securities of the company, whether an applicant for securities will or will not have the right to renounce in favour of other persons; and
b. except in so far as it requires a prospectus to be dated, to the issue of a prospectus relating to securities which are or are to be in all respects uniform with securities previously issued and for the time being dealt in or quoted on a recognized stock exchange, but, subject as aforesaid, this section shall apply to a prospectus or form of application whether issued on or with reference to the formation of a company or subsequently.
5. Nothing in this section shall limit or diminish any liability which any person may incur under any law for the time being in force in India or under this Act apart from this section.
Legal Commentary & Landmark Judgments: Section 387
Section 387 regulates the issuance, circulation, and distribution of prospectuses by foreign companies offering securities for subscription in India, mandating full disclosure of corporate charters, management constitution, and material contracts.
In investor class actions or suits under Section 37 challenging a foreign company's securities offer in India, plead specific omissions under Section 387. Establish that omission of material foreign contracts or undisclosed liabilities deprived Indian investors of informed consent, shifting the burden of proving bona fide disclosure onto the promoters.