Question

What is meant by Prospectus?

Answer 1

According to Section 2(36) of the Companies Act, any document inviting the public to buy its shares or debentures comes under the definition of a prospectus. It also applies to advertisements inviting deposits from the public. A prospectus is “the only window through which a prospective investor can look into the soundness of a company’s venture”. Hence it must specify at least the following matters as per Schedule II:

1. The prospectus contains the main objectives of the company, the name, and address of the signatories of the Memorandum of Association, and the number of shares held by them.
2. The name, addresses, and occupation of directors and managing directors.
3. The number and classes of shares and debentures issued.
4. The qualification share of directors and the interest of directors for the promotion of the company.
5. The number, description, and document of shares or debentures within the two preceding years have been agreed to be issued other than cash.