Meaning and definition of prospectus and the various contents of a prospectus.
After the receipt of certificate of incorporation, if the promoters of a public limited company wishes to issue shares to the public, he will issue a document called prospectus. It is an invitation to the public to subscribe to the share capital of the company. The companies Act, 1956 defines prospectus as any document described or issued as a prospectus and include any notice, circular, advertisement or other documents inviting deposits from the public or inviting offer from the public for the subscription of shares. It is circulated among the public in printed pamphlets. It gives all necessary information about the company so that the prospective shareholders may fully understand the objectives and the plans of the company.
Prospectus is issued with the following broad objectives:
- 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.
- It maintains all authentic records on the issue and make the directors liable for the misstatement in the prospectus.
The following important matter are included in the prospectus:
- 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.
- 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 number, description and the document of shares or debentures which within the two preceding years have been agreed to be issed other than cash.
- The name and addresses of the vendors of any property acquired by the company and the amount paid or to be paid.
- 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.