Explained: The concept of shelf registration

Shelf registration allows the issuer to access funds from the market whenever it wants, that too in a very short time with little administrative paperwork.

Shelf registration is a type of public offering which permits certain issuers to file or register for a bond offering in advance. It is also known as shelf offering or shelf prospectus.  

In India, shelf registrations are valid for a period of up to one year. During this period, the company can choose to issue its securities anytime it wants, allowing the issuer to offer its securities in favourable market conditions.  

Companies that seek a shelf registration need to file an Information Memorandum in Form PAS-2. Moreover, a maximum of four issues of securities can be made using this route. 

For example, a company planning to raise funds through bonds issuance can postpone doing so if the market rates are high. After some time, when the rates stabilize, it can issue bonds, saving precious amounts of funds that would other have been paid in the form of interest payments. 

Advantages of shelf registration 

A shelf registering does not entail compulsory issuance of securities. Rather, the company has the flexibility to issue the securities fully, partially or none at all.  

It allows the issuer to access funds from the market whenever it wants, that too in a very short period with little administrative paperwork.  

The provision of shelf registration saves the issuer from the process of re-registering the securities just before it actually issues them. Moreover, securities that are not issued during the stipulated period, that is, before the registration expires, are known as treasury shares.