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INTRODUCTION
Object of a Prospectus
Nature of Prospectus
When the Prospectus need to be issued
Golden rule in prospectus
Legal requirement
Prospectus
Contents of Prospectus
CONCLUSIONS
BIBLIOGRAPHY:
regarding
issue
of
INTRODUCTION
Prospectus is a document that invites the public to subscribe to the share capital
or debentures of a company. If it does not do that, it cannot be called a
prospectus. According to the Companies (Amendment) Act, 1971, an invitation
to the public inviting deposits is also deemed to be a prospectus. Some
companies do not directly to the public themselves, but allot the entire share
capital to an intermediary, which then offers the shares to the public by an
advertisement of its own. Any document by which such offer for sale to public
is made is deemed to be a prospectus.
After getting the company incorporated, promoters will raise finances. The
public is invited to purchase shares and debentures of the company through an
advertisement. A document containing detailed information about the company
and an invitation to the public subscribing to the share capital and debentures is
issued. This document is called prospectuses. Private companies cannot issue a
prospectus because they are strictly prohibited from inviting the public to
subscribe to their shares. Only public companies can issue a prospectus. Section
2 (36) of the Companies Act defines prospectus as, A prospectus means any
document described or issued as prospectus and includes any notice, circular,
advertisement or other documents invent deposits from public or inviting offers
from the public for the subscription or purchase of any shares in or debentures
of a body corporate.
The prospectus is not an offer in the contractual sense but only an invitation to
offer. A document constructed to be a prospectus should be issued to the public.
A prospectus should have the following essentials.
Object of a Prospectus
The objects of issuing a prospectus are as under:
1.
2.
To give a bureau of a condition on which the public is invited to invest in
shares and debentures.
3.
To make a declaration that the directors of the company are liable for the
condition stated in the prospectus.
Nature of Prospectus
As said earlier that the prospectus is an invitation to the public to invest in the
shares or debentures of a company. But the term public is nowhere defined in
the Companies Act. So, far as it is related to prospectus, public is meant to be
the ordinary common people. Whether or not the invitation for investment is
made to the public depends upon some situation, such as:
1.
2.
3.
4.
Under what conditions did the member of the public accept the
prospectus?
3.
The contents of the prospectus should conform to the provision of the
Companies Act.
4.
5.
The conditions of civil liability as laid down must be strictly adhered to
issue and registration of prospectus or legal requirement regarding issue of
prospectus.
b.
(ii)
(iii)
(iv)
(v)
c.
(i)
(ii)
d.
If the above provision of law has been fulfilled, or the necessary documents
have been attached, the Registrar can refuse to register the companys
prospectus.According to the Section 60(4), no prospectus shall be issued more
than ninety days after the date on which a copy thereof is delivered for
registration. Of the prospectus is so issued. It shall be deemed to be a
prospectus a copy of which has not been delivered to the Registrar. If a
prospectus issued in contravention of the above stated provisions, then the
company and every person who knows a party to the issue of the prospectus
shall be punishable with a fine.
Contents of Prospectus
The main contents of a prospectus are:
1.
Main object of the company with the names, addresses, description
and occupation of signatories to the memorandum and the number of shares
subscribed for by them.
2.
Number and classes of shares and the nature and extent of the
interest of holders thereof in the property and profits of the company.
3.
The number of redeemable preference shares intended to be issued
and the date of redemption or where no date is fixed; the period of notice
required for redeeming the share s and proposed method of redemption.
4.
The number of shares. If any, fixed by the Article as the
qualification of a director and the remuneration of the directors for the service.
5.
The names, occupation and addresses of directors, managing
director and manager together with any provision in the Articles or a contract
regarding their appointment remuneration or compensation for loss of office.
6.
The time of opening of the subscription list should be given in the
prospectus.
7.
The amount payable on application and allotment on each share
should be stated. If any prospectus is issued within two years, the details of the
shares subscribed for any allotted.
8.
The particular about any option or preferential right to be given to
any person to subscribe for shares or debentures of the company.
9.
The number of shares or debentures which within the two preceding
year been issued for a considerations other than cash.
10. Particulars about premium received on shares within two preceding
years or to be received.
11. The amount or rate of underwriting commission.
12. Preliminary expenses.
13. The names and addresses of auditors, if any, of the company.
14. Where the shares are of more than one class, the rights of voting and
rights as to capital and dividend attached to several classes of shares.
15. If nay reserve or profits of the company have been capitalized,
particulars of capitalizations and particulars of the surplus arising from any
revaluation of the assets of the company.
16. A reasonable time and place at which copies of all accounts on which
the report of auditors is based may be inspected.
Conclusion
A public company raises its capital from the public and it issues prospectus for
this purpose. Sometimes, the promoters of a company decide not to approach
the public for raising necessary capital. They are hopeful of raising funds from
the friends and relations or through underwriters. In that case a prospectus need
not be issued but a Statement in Lieu of Prospectus must be filed with the
registrar at least three days before the first allotment of shares. Such a statement
must be signed by every person who is named therein as a director or proposed
director of the company. This statement will be drafted strictly in accordance
with the particulars set out in a part I of Schedule III of the Act.
BIBLIOGRAPHY