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Capital Market and Securities Laws · Issue and Listing of Non-Convertible Securities

Public Issue Process and Disclosures for Non-Convertible Securities

Updated 11 October 2026 · Fact-checked

A public issue of non-convertible securities (NCS) follows set stages: appoint intermediaries, file a draft offer document with the stock exchange and SEBI, take comments, file the prospectus with the Registrar, open the issue, receive applications, allot and list. Disclosures reach investors through the offer document, abridged prospectus and general information document.

Understand Public Issue Process and Disclosures

Non-convertible securities are debt instruments such as debentures and bonds that cannot be converted into shares. When a company offers them to the public, it must follow the SEBI regulations on issue and listing of NCS, along with the Companies Act, 2013. The aim is simple: investors must get full, true information before they put in money.

The process starts with preparation. The issuer appoints SEBI-registered intermediaries such as merchant bankers (lead managers), a registrar to the issue, a debenture trustee and a credit rating agency. The issuer also decides the terms: size, tenor, coupon and security.

Next comes the draft offer document. It is filed with the designated stock exchange, and a copy goes to SEBI for its information. It is placed on public domain so that investors and others can send comments. The issuer then updates the document and files the final prospectus with the Registrar of Companies, the stock exchange and SEBI.

Disclosure is layered. The full prospectus is long, so the issuer also provides an abridged prospectus with the key facts, which goes with the application form. The general information document (GID) carries the general, standard information about the issue process and the investor's rights and procedures. It is used along with the issuer-specific key information document. Check the exact names and contents in the SEBI NCS Regulations before writing them in the exam.

The issue then opens for subscription for the notified minimum days. Applications are made, usually through the ASBA facility. If the issue gets the minimum subscription disclosed in the offer document, the issuer allots the securities and lists them. If not, money must be refunded. Section 40 of the Companies Act adds a safeguard: application money must be kept in a separate bank account in a scheduled bank and used only for adjustment against allotment (where the exchange permission exists) or for repayment.

Key rules to remember

Stock exchange permission (Section 40(1))
Public offer → apply to one or more recognised stock exchanges before the offer and obtain permission for dealing in the securities
Applies to every company making a public offer. The prospectus must name the exchange(s) where the application was made (Section 40(2)).
Application money (Section 40(3))
Separate bank account in a scheduled bank; use only for (a) adjustment against allotment, or (b) repayment within the time specified by SEBI
Use for allotment only where the securities are permitted to be dealt with on the exchange named in the prospectus.
Default penalty (Section 40(5))
Company: fine ₹5,00,000 to ₹50,00,000. Officer in default: fine ₹50,000 to ₹3,00,000
Imprisonment for officers was omitted with effect from 21 December 2020.
Shelf prospectus (Section 31)
Validity ≤ 1 year from the opening of the first offer; later offers need an information memorandum, not a fresh prospectus
Applies to the class of companies SEBI specifies. The information memorandum and shelf prospectus together are deemed a prospectus.
Core sequence of a public issue
Intermediaries → draft offer document → public comments → prospectus → issue opens → allotment → listing
Use this as the answer skeleton. Take timelines and minimum subscription figures from the SEBI NCS Regulations.

How to solve Public Issue Process and Disclosures questions

Use this method for any question on the public issue process or disclosures for NCS. It keeps your answer in the ICSI pattern: provision, analysis, conclusion.

  1. 1Read the question and mark what is asked: the full process, one document, a timeline, or a default consequence.
  2. 2State the governing provisions: the SEBI NCS Regulations for the process and the Companies Act, 2013 for prospectus matters, naming Section 40 for exchange permission and application money.
  3. 3List the stages in order: intermediaries, draft offer document, filing, comments, prospectus, opening, allotment, listing.
  4. 4Explain each document asked about: its purpose, who files it, where it is filed and who receives it.
  5. 5Apply the rule to the facts given: check dates, application money handling, subscription level and exchange permission.
  6. 6Give a clear conclusion and, if a default arises, state the consequence such as refund or penalty.

Quickest way: Stage-by-stage skeleton

When to use it: Use when you have about 8 to 10 minutes for a descriptive question on the process.

  1. Write one line naming the law: SEBI NCS Regulations and the Companies Act, 2013.
  2. Write the stages as short numbered points, one line each.
  3. Add one line each on the draft offer document, abridged prospectus and GID.
  4. Add the Section 40 safeguards: exchange permission and separate bank account.
  5. End with a one-line conclusion on refund if minimum subscription is not met.

Common mistakes in Public Issue Process and Disclosures

  • Saying the draft offer document is filed with SEBI for approval.

    Students confuse the NCS process with older equity IPO practice.

    Fix: Write that it is filed with the stock exchange, with a copy to SEBI for information, and put on the public domain for comments. Verify the exact wording in the regulations.

  • Mixing up the abridged prospectus, GID and prospectus.

    All three are disclosure documents and sound alike.

    Fix: Remember: prospectus is the full issuer document, abridged prospectus is the short version with the application form, GID gives general information on process and rights.

  • Forgetting Section 40 on exchange permission.

    Students focus only on SEBI rules.

    Fix: Always add that the company must apply to a recognised stock exchange before the offer and name the exchange in the prospectus.

  • Saying application money can be used freely after receipt.

    Students overlook the separate-account rule.

    Fix: State that money stays in a separate account in a scheduled bank and is used only for allotment or repayment.

  • Quoting the old Section 40 penalty with imprisonment.

    Older notes still show imprisonment for officers.

    Fix: Quote the fines only: ₹5 lakh to ₹50 lakh for the company; ₹50,000 to ₹3 lakh for officers in default.

  • Treating shelf prospectus validity as unlimited.

    The words 'no further prospectus' get over-read.

    Fix: Write that validity is not more than one year from the opening of the first offer, with an information memorandum before each later offer.

Worked examples

Example 1

Aarav Finance Ltd plans a public issue of non-convertible debentures. Describe the sequence of the process and the safeguards on application money under the Companies Act, 2013.

Show the solution
  1. Provision: the issue is governed by the SEBI NCS Regulations and the Companies Act, 2013, including Section 40.
  2. Stage 1: the company appoints intermediaries: lead manager, registrar, debenture trustee and credit rating agency.
  3. Stage 2: it files the draft offer document with the stock exchange, with a copy to SEBI, and places it on the public domain for comments.
  4. Stage 3: after incorporating comments, it files the prospectus with the Registrar, the exchange and SEBI.
  5. Stage 4: it issues the abridged prospectus with application forms and the GID, and opens the issue.
  6. Safeguard: under Section 40(1) it must apply to a recognised stock exchange and obtain permission before the offer. Under Section 40(3) application money goes into a separate account in a scheduled bank.
  7. Use of money: only for adjustment against allotment where the exchange permission exists, or for repayment if allotment is not possible.
  8. Conclusion: the company follows the stages in order and keeps the funds ring-fenced until allotment.

Answer: The company follows the sequence of intermediaries, draft offer document, prospectus, opening, allotment and listing, and under Section 40(3) must hold application money in a separate scheduled-bank account for allotment adjustment or repayment only.

Example 2

Meera Industries Ltd made a public offer of debentures but did not apply to any stock exchange for permission before the offer. What is the consequence under Section 40 of the Companies Act, 2013?

Show the solution
  1. Provision: Section 40(1) requires every company making a public offer to apply to one or more recognised stock exchanges before the offer and obtain permission for dealing in the securities.
  2. Analysis: Meera Industries made a public offer without applying, so it has defaulted on Section 40.
  3. Consequence for the company under Section 40(5): fine of not less than ₹5,00,000 and up to ₹50,00,000.
  4. Consequence for officers in default: fine of not less than ₹50,000 and up to ₹3,00,000. Imprisonment was removed from 21 December 2020.
  5. Further effect: under Section 40(3)(a) application money can be adjusted against allotment only where the securities are permitted to be dealt with on the exchange named in the prospectus. Without permission, the money must be repaid.
  6. Conclusion: the company and its officers in default are liable to fines, and the money must be refunded.

Answer: The company is liable to a fine of ₹5,00,000 to ₹50,00,000, officers in default to a fine of ₹50,000 to ₹3,00,000, and application money cannot be adjusted against allotment without exchange permission.

Exam tips

  • Write the process as a numbered sequence. Examiners reward clear order.
  • Name the document and where it is filed: exchange, SEBI, Registrar. This is where marks are lost.
  • Quote Section 40 penalties exactly and mention that imprisonment was removed.
  • Take minimum subscription figures and day counts from the SEBI NCS Regulations; if unsure, describe the rule in words rather than guess a number.
  • Close every answer with a one-line conclusion.

Practice questions from Issue and Listing of Non-Convertible Securities

Public Issue Process and Disclosures in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Public Issue Process and Disclosures: frequently asked questions

What is a general information document in an NCS public issue?

It is a standard document giving general information about the issue process, investor rights and application procedure. It is read along with the issuer-specific offer document. Confirm the exact content from the SEBI NCS Regulations.

Why is an abridged prospectus used?

The full prospectus is long. The abridged prospectus gives the key facts in short form and goes with the application form, so investors can decide quickly without reading the whole document.

What happens if minimum subscription is not received?

The issuer cannot proceed to allot. Application money must be refunded, and Section 40(3)(b) permits the account money to be used for repayment within the time specified by SEBI.

Does Section 40 apply to debentures?

Section 40 applies to every company making a public offer and refers to securities, so it covers debentures offered to the public.