PROSPECTUS OF A COMPANY

formal legal DocumentRequired and filed with Securities and Exchange Commission(SECP).provides details about an investment offering for sale to the public.should contain the facts that an investor needs to make an informed investment decision.

prospectus is also known as “OFFER DOCUMENT”.

INTRODUCTION

It informs the company about the formation of a new company.

It serves as a written evidence about the terms and conditions of issue of shares or debentures of a company.

It induces the investors to invest in the shares and debentures of the company.

It describes the nature, extent and future prospectus of the company.

Objectives of Prospectus

Every public listed company who intends to offer shares or debentures of the company to the public.

Every private company who ceases to be a private company and converts into a public company and intends to offer shares or debentures of the company to the public.

WHICH COMPANIES ARE REQUIRED TO ISSUE PROSPECTUS:

A Prospectus is required to be issued only after the incorporation of company.

The prospectus must contain all the particulars, listed in the schedule II of Companies act.

The prospectus must be dated. Before a prospectus is issued, a copy of it must

be registered with the registration of companies.

Prospectus shall be issued within ninety days of its registration .

Legal Requirements of Prospectus

The following important matter are included in the prospectus:

The name, addresses and occupation of directors and managing directors.

The number and classes of shares and debentures issued.

The qualification share of directors and the interest of directors for the promotion of company.

The prospectus contains the main objectives of the company, the name and addresses of the signatories of the memorandum of association and the number of shares held by them.

Contents Of A Prospectus

Particulars about the directors, secretaries and the treasures and their remuneration.

The amount for the minimum subscription.

If the company carrying on business, the length of time of such businesses.

The estimated amount of preliminary expenses.

Name and address of the auditors, bankers and solicitors of the company.

Time and place where copies of balance sheets, profits and loss account and the auditors report may be inspected.

The auditor’s report so submitted must deal with the profit and loss of the company for each year of five financial years immediately preceding the issue of prospectus.

If any profit or reserve has been capitalized, the particulars of such capitalization will be stated in the prospectus.

Every prospectus issued by or on behalf of a company must be dated and that date shall unless the contrary is proved, be regarded as the date of its publication. (section 55).

A copy of the prospectus signed by every director or proposed director or by his agent must be delivered to the registrar on or before the date of publication

FORMALITIES IN ISSUING COMPANY PROSPECTUS

A prospectus must not be issued more than 90 days after the date on which a copy there of is delivered for registration. If a prospectus is so issued it will be deemed to be a prospectus a copy of which has not been delivered to the registrar.

Contd……

A public limited company.a. which has not issued a prospectus.b. which has issued a prospectus, but has

not proceeded to allot any of the shares. offered to the public for subscription.

is required to deliver to Registrar a “statement in lieu of prospectus” for registration, at least three days before the allotment of shares or debentures.

STATEMENT IN LIEU OF A PROSPECTUS

Schedule III contains the details of the particulars to be furnished. In case of private company becoming a public company, statement in lieu of the prospectus can be filed. Schedule IV contains the details of the particulars to be furnished for the same.

Such a statement is required to be signed by every person, who is named therein as a director or a proposed director, of the company, or by his agent authorized in writing.

Contd….

If allotment of shares or debentures is made without filing the statements in lieu of prospectus, the allottee may avoid it within two months after the statutory meeting, or where no such meeting is to be held, within two months of the allotment. Contravention also renders the company and every director liable to fine up to rupees 10,000.

Contd……

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