Can the Objects of a Further Public Offer (FPO) Be Altered?

A Further Public Offer (FPO) is a mechanism through which a listed company raises additional capital by issuing securities to the public. The objectives for which the funds are raised are disclosed in the prospectus and form a fundamental basis for investor decision-making. However, a pertinent question arises—can the company subsequently change the stated objectives of the FPO?

Legal Position: Alteration Permitted, But Strictly Regulated

The answer is yes, but such alteration is permitted only under stringent legal safeguards designed to protect investor interests and ensure transparency.

Legal Framework Governing Alteration of FPO Objects

The procedure and conditions for altering the objects of an FPO are primarily governed by:

Section 27 of the Companies Act, 2013, and
Rule 7 of the Companies (Prospectus and Allotment of Securities) Rules, 2014

These provisions ensure that any deviation from the stated objects is subject to shareholder oversight, regulatory compliance, and investor protection mechanisms.

Section 27 – Key Requirements

As per Section 27(2) of the Companies Act, 2013, a company cannot change the objects of an FPO—if funds raised are unutilized—unless:

Special Resolution:
A special resolution is passed by the shareholders in a general meeting approving the variation.
Public Disclosure:
The company must publish the resolution in:
- One English newspaper, and
- One vernacular language newspaper
  Both must be widely circulated in the district of the registered office of the company.
Justification:
A clear justification for the proposed change must be provided to shareholders.
Exit Opportunity to Dissenting Shareholders:
Shareholders who vote against the resolution (i.e. dissenting shareholders) must be provided an exit opportunityby the promoters or controlling shareholders, in line with SEBI-prescribed norms.

Rule 7 of the Companies (Prospectus and Allotment of Securities) Rules, 2014

This rule lays down the disclosure framework for the notice of the proposed resolution. The notice must include the following details:

(a) The original purpose/object of the FPO
(b) Total money raised
(c) Money already utilised for stated objects
(d) Achievement status of proposed objects (e.g., 60% completed)
(e) Unutilised amount
(f) Proposed variation in contracts or objects
(g) Reason and justification for variation
(h) Timeline for achieving revised objects
(i) Clause-wise details of original object (as per Rule 3(3))
(j) Risk factors related to the new objects
(k) Any other material information necessary for informed decision-making

Conclusion

Yes, the objects of an FPO can be altered, but the process is governed by a framework designed to uphold investor trust and market integrity. Any variation in the utilization of funds must be:

Approved by a special resolution of shareholders,
Disclosed publicly with justification, and
Supported by an exit route for dissenting shareholders.

These safeguards ensure that investors are not misled and retain confidence in the company’s governance practices.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. Readers are advised to refer to the applicable provisions of law or consult legal professionals for specific guidance. The legal position is as per the law prevailing at the time of writing and may be subject to amendments or judicial interpretations.

From the desk of CS SHARATH