Question

Answer the following question:

fine Prospectus. Explain its contents.

Answer 1

Definition :

Section 2 (70) of the Companies Act, 2013, defines a prospectus as “any document described or issued as a prospectus and includes a red herring prospectus referred to in Section 32 or shelf prospectus referred to in section 31 or any notice, circular; advertisement or other document inviting offers from the public for the subscription or purchase of any securities Of, a body corporate.”

The prospectus is a document issued by public company publishing the highlights and business prospects of the company and thereby wishing to sell newly issued shares or debentures to the public. In precise words, a prospectus refers to any document, statement, notice, circular or advertisement, issued by the company to invite the public to purchase its shares or debentures or to deposit money with it.
A document shall be called a ‘Prospectus’ if it satisfies two conditions, viz.
(1) It invites subscriptions for shares or debentures or invites deposits.
(2) This invitation is made to the public at large.

Contents:

The prospectus of a public company contains detailed information about the various aspects of the company. It contains information mainly about the following matters :
(1) The name of the issuing company.
(2) The address of its registered office of the company with phone numbers, e-mail addresses, etc.
(3) Particulars of capital structure, i.e. authorised capital, issued capital, paid-up capital, etc.
(4) The number and classes of shares, their face value, the amount payable on application, and allotment.
(5) The name of the Stock Exchange where the shares or debentures are proposed to be enlisted.
(6) The main objects of the company and future prospects of the company.
(7) Nature of business of the company.
(8) Future plans of the company.
(9) Location of the factory.
(10) Particulars of assets or any property proposed to be purchased by the company and the purchase consideration, names, and addresses of the vendors.
(11) Information about the promoters, directors, managing director, managers, bankers, brokers, solicitors, underwriters, etc. mentioning their names, addresses, descriptions, occupations, and the remunerations payable to them.
(12) Interest of Directors
(13) Rights of Directors with respect to the allotment.
(14) The details of preliminary contracts.
(15) The amount of the minimum subscription and the declaration about a refund of application money if the minimum subscription is not received.
(16) Procedure for the application of shares.
(17) Opening and closing dates of the subscription list.
(18) Date and signature of all Directors.
(19) Declaration by the company stating that all the provisions of the Companies Act have been complied with and that the prospectus does not contain anything contrary to the provisions made in Companies Act, Securities Contracts (Regulation) Act, 1956 and the SEBI Act, 1992.
(20) A statement made by the experts like Company Secretary, Chartered Accountant, Cost Accountant. Value, Engineer, etc. relating to the matters that they have looked into. They have to give written consent to issue prospectus.