Prospectus

Prospectus means any document described

or issued as a prospectus and includes any
notice, circular, advertisement or other
documents inviting deposits from the
public or inviting offers from the public for
the subscription or purchase of any shares
in, or debentures of, a body corporate.
Sec. 2 (36)
Essentials of Definition

Document
Subscription
Invitation to public
Offer to public
Dating of Prospectus (Sec. 55)

Date of Publication of Prospectus

To be signed by the Director(s) or

proposed Director(s) or by their
agent(s) in writing
Registration of Prospectus (Sec.
60)
A copy to be delivered to the Registrar
for registration.
Registration to be made before or on the
date of publication.
The copy must be signed by the
Director(s) or proposed Director(s) or by
their agents in writing.
Delivery to the Registrar to be mentioned
in the prospectus.
Contd..
The prospectus must also specify that
necessary documents and consent of
the experts has been attached to or
endorsed to the copies so delivered.
Prospectus must be issued within 90
days from delivery date for
registration.
Objects of Registration
To keep authenticated records.
To pinpoint the responsibility.
Contents of Prospectus
Prospectus is the window through which
an investor can look in to the soundness
of a companys ventures
Date & Signature
Registration
Experts Consent
Disclosures
Contents of Prospectus (Sec. 56)

State the matters specified in Part- I of

Schedule II
Set out the reports specified in Part II
of Schedule II
The above two provisions shall have
effect subject to the provision contained
in Part III of Schedule II
Part I of Schedule II
Main objects of the company and particulars
of securities
No. and classes of shares
No. of Redeemable preference shares
Qualification shares
Particulars about Director & Managing
Director
Minimum subscription
The time of the opening of subscription list
Contd..
Amount payable on application allotment on
each share
Premium on shares
Underwriters
Particulars of Auditors
Particulars of any option to subscribe for
shares
Outstanding litigation
Management perception of risk factors
Details of any issue within past 3 years
Part II of Schedule II
Report by the Auditors
Report by the Accountants
Consent of Directors, Auditors etc
Statutory & other information
Part III of Schedule II
For a company carrying on business for
less than 5 financial years, then the
reference is to the no. of financial years
for which the business has been carried on.
If the prospectus is issued more than 2
years after the date at which the company
is entitled to commence business,
particulars of the signatories to the
memorandum and shares subscribed for by
them and details of preliminary expenses
need not be given.
Golden Rule
Full frank and honest disclosure of
all facts
Scrupulously accurate
No error of commission (Mis-
statements)
No error of omission (non-disclosure
of relevant facts)
The true nature of the companys
venture to be disclosed
Statement by Experts (Sec 57 & 59)

Experts unconnected with the

formation of the company
Statement of consent
Deemed Prospectus (Sec 64)

Offer for sale- issuing house

Prospectus by implication
Intention to offer shares or debentures to
the public
Offer within 6 months of allotment
Offer made when whole consideration
not received by company
Additional information
Statement in Lieu of Prospectus

Where a public company does not invite

public to subscribe for its shares, but
arranges to get money from private
sources, it need not issue a prospectus to
the public. In such a case the promoters
are required to prepare a draft prospectus
known as statement in lieu of prospectus
Sec. 70
Contd..

It should contain the information

required to be disclosed by
schedule III of the Act.
Terms of contract mentioned in
prospectus not to be varied
Mis-Statements in Prospectus
Misstatements?
Say that something is expected when in
reality it is not
Say that the Directors have an intention to
do something when they have no such
intention
State accurately all the relevant facts and
not to omit any fact which may be relevant
-Golden Rule
Any Mis-Statement Leads to
Liability

Liabilities
Civil Liability
Criminal Liability
 Liability for Mis-statements in Prospectus

Civil Liabilities Criminal Liabilities

Against the Company Against the Directors,

Promoters and
Experts

Rescission Claim for Damages Compensation Damages

of Damages (Sec. 62) for
Contract Non-
compliance
(Sec, 56)
For Fradulent For Innocent
Misrepresentation Misrepresentation
Criminal Liability
Fine upto Rs. 50,000/- or
Imprisonment upto 2 years, or
Both
Penalty for Fraud (Sec 68)
Fine upto Rs. 1,00,000 or
Imprisonment upto 5 years, or
Both
Allotment on Fictitious Names (Sec 68A)
Imprisonment upto 5 years
Shelf Prospectus & Information
Memorandum (Sec 60A & 60B)
Meaning of shelf Prospectus
Shelf Prospectus means a prospectus
issued by any financial institution or bank
for one or more issues of the securities or
class of securities specified in the
prospectus
Validity
Valid for a period of one year from the date
of opening of the first offering of the shelf-
prospectus
Contd..

Information Memorandum
For subsequent offering, information
memorandum updating the information
under the various heads will have to be
filed and entire set comprising of shelf
prospectus and the memorandum shall
constitute the prospectus and have to
be circulated to the general public
Red Herring Prospectus

Meaning
A red-herring prospectus is a
prospectus, which does not have
complete particulars on the price of
securities offered and quantum of
securities offered.