Prospectus According to Section 2(36) of the Companies Act, “ prospectus means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document 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”.

Objects of a Prospectus To invite the public to invest in the shares or debentures of a company. To give a bureau of the conditions on which the public is invited to invest in shares and debentures. To make a declaration that the directors of the company are liable for the conditions stated in the prospectus.

Contents of the Prospectus According to schedule II Part I, the following must be specified in the prospectus. Main objects of the company and signatories to the memorandum Share Capital Terms of the Present Issue Particulars of the issue Managerial Personnel Minimum Subscription Opening of the Subscription List Application and Allotment Moneys Particulars of options to subscribe for Shares and Debentures Shares and Debentures issued for Consideration other than Cash Share Premium Underwriters Preliminary Expenses Promoters Details of Business Property Acquired Restriction on Articles Time and Place of Inspection Material Contracts

Issue after Incorporation Registration of Prospectus Legal Requirements Regarding issue of Prospectus

Mis-statement in Prospectus A statement giving wrong information to the would-be investors, misrepresenting the facts and trying to mislead the investors would certainly be a mis- statement.

Remedies for Mis- statement and Omissions 1.Rights Against the Company Right of Recession of Contract Damages for Fraud 2. Rights Against Directors, Promoters and other Liable Persons Civil Liability Criminal Liability Special Criminal Liability for Fraudulent Inducement

STATEMENT IN Lieu of Prospectus It refers to the statement that is issued in place of a prospectus and delivered to the registrar for registration.

Conditions for issuing statement in lieu of prospectus When a public company with share capital has not issued a prospectus. When a private company is converted into a public company. When a company has the necessary capital on its incorporation and it does not feel the need of issuing a prospectus. When a company has sold its shares and debentures to such persons who will later offer it to the publics

Minimum subscription It refers to the amount of money that must be raised by the issue of share capital to provide for the matters explained in the prospectus. The minimum subscription is prescribed to be collected for: 1.Paying for any property purchased by the company for its use. 2.Paying the initial expenses or commission. 3.Paying back any loans taken for the above purposes. 4.Working CAPITAL.

Difference b/w Underwriter and Broker Underwriter is a person who makes a contract with the company that, if the company’s shares or debentures are not sold to a specified number, he himself shall purchase the shares or debentures. Broker makes no such contract. Underwriter is paid a commission on the value of shares or debentures that he underwrites. Broker is paid a brokerage on the number of shares or debentures he sells for the company. The maximum rate of commission on shares is 5%, and on debentures is 2.5% According to section 76(3), only lawful brokerage can be paid. The name, address and business of every underwriter must be given in the company’s prospectus. No such information about brokers is required. UnderwriterBroker

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