Company Prospectus

1.What is a company prospectus?
A prospectus is an essential disclosure

document that a company has to issue at
the time of issuing investment securities
to the public. These formal documents
provide detailed information to
prospective investors about mutual funds,
bonds, stocks, and other investment
offerings to the public.
Characteristics Of Prospectus:
Some essential characteristics such as
1.It is a document described or issued as a
prospectus.
2.It includes any
notice,circular,advertisement
inviting deposits from the public or other
document.
3.It is an invitation to the members of the
public.
4.The public is invited to subscribe the
shares or debentures of the company.
5.The term public does not mean an
invitation of very large number of people.It
is enough if the invitation is to a section of
the public.
*Form and contents Of Prospectus:
i.Principal objects of the company and
particulars of signatories of the
memorandum of the company and shares
subscribed by them.
ii.Number and classes of shares and extent
of interest of holders.
iii.The rights in respect of capital and
dividends attached t0 different classes of
shares.
iv.The minimum amount of subscription
and amount payable on application.
v.Time of opening subscription list.
vi.Preliminary expenses incurred.
vii.Details of any premimum or under
writing commission paid.
viii.particulars of reserves including
reserves capitalized.
ix.Names and addresses of auditors of the
company.
x.The nature and extent of restrictions
upon members at company meetings.
xi.Restrictions upon the powers of
directors.
xii.Voting rights,capitalisations of reserves
and surplus of revaluation.
xiii.Inspection of balance sheet,profit and
loss amount.
xiv.There are two reports which must be
annex to the prospectus like;
1.Reports by the auditors
2.Reports by the accountant.
#Legal Requiements Of Prospectus
1.Time: A prospectus is to be issued after
the incorporation
2.Particulars:The prospectus must contain
all the particulars listed in Schedule II to
the companies act.
3.Date: The prospectus must be dated and
this date will be considered to be the date
of publication unless otherwise proved
sec:55
4.Signature:The prospectus must be signed
by every person mentioned there in as
director or proposed director or his agent.
5.Copy of prospectus:Every application
form for his shares,issued by the
company,must be accompanied by a copy
of the prospectus except
i.Application forms issued in connection
with a bona fide invitation to a person to
enter an under writing agreement and
ii.application forms issued to existing
members and debenture holders..sec.
56(3)
6.Statement by expert:A statement
relating to the company, by an expert can
be included in the prospectus only if the
expert concerned is not engaged or
interested in the formation,promotion, or
the management of the company.
7.Deposits:Deposits are not be invited
without issuing an advertisement.The
Central Government may in consultation
with the Reserve Bank Of India prescribed
the limits.
8.Before a prospectus is issued,it must be
registered with the Registrar of
Companies.Copies of relevant documents
of directors and experts to the issue of the
prospectus and copies(contracts) have to
be filled when the application is made of
registration.If the relevant documents are
not filed or if the prospectus does not
comply with the provisions of the
Act,registration will be refued.No
prospectus can be issued more the 90 days
after a copy it is filed for registration.
9.Terms of prospectus:The terms of any
contract,mentioned in the
prospectus,cannot be varied after
registration of the prospectus except with
the approval of the members in a general
meeting.(sec61)
10.Penalty for Non compliance:If the
aforesaid rules,relating to the matters to
be included in the prospectus, are not
complied with,any person who is
knowingly a party to the issue
therefore,shall be punished with a fine
which may be extend to Rs.50000
11.Defence:A person charged with non
compliance of the aforesaid rules will be
excused in the cases of
i.as regards any matter not disclosed,if he
proves that he had no knowledge
ii.if he proves that thr non compliance or
conversation arose from an honest mistake
of fact on his part.
*Misstatements in the prospectus:
Any statement in the prospectus that is
eerroneous or misleading
is referred to as misstatements in the
prospectus. A misrepresentation is defined
as the inclusion or omission of a fact that is
likely to mislead the public.
# Who are liable for misstatements in
prospectus?
A person who has signed and given
consent to the prospectus is liable for
misstatement. Persons who had the
management of the whole, or substantially
whole of the affairs of the company can be
held liable for misstatement in prospectus
if they have signed the prospectus and had
given consent for the same.
# The court further observed that as per
Section 65 of the Companies Act, 1956
untrue statements in the prospectus will
result in liability for the loss or damage
sustained by a person while subscribing
for shares or debentures based on such
statements in the Prospectus.
*Statement in liue of Prospectus:The
Statement in Lieu of Prospectus is a
document filed with the Registrar of the
Companies ( ROC ) when the company has
not issued prospectus to the public for
inviting them to subscribe for shares. The
statement must contain the signatures of
all the directors or their agents authorized
in writing. It is similar to a prospectus but
contains brief information. The Statement
in Lieu of Prospectus needs to be filed with
the registrar if the company does not
issues prospectus or the company issued
prospectus but because minimum
subscription has not been received the
company has not proceeded for the
allotment of shares.
*Minimum Subscription:
Minimum subscription refers to the
minimum amount required by the
company for its preliminary functions. It
has been provided by the Companies Act,
that the company must receive
applications for a certain minimum number
of shares before going ahead with the
allotment of shares in order to prevent
companies from commencing business
with inadequate resources. This is called
the 'minimum subscription'. The limit of
minimum subscription is 90% of the size of
the issue.

Company Prospectus

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1.What is a company prospectus?

A prospectus is an essential disclosure

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