What is Prospectus of a Company?
After the receipt of Certificate of Incorporation from the Registrar of companies, the promoters of fa public company invite the public and financial institutions to subscribe to the capital of the company. This notice, advertisement or other document inviting offers for the subscription to the share capital of the company is called prospectus. Only public companies can issue a prospectus.
Prospectus of a Company:
prospectus is a valuable document issued by the company for raisin of the capital.
prospectus has been defined as “any document described of issued as prospectus and includes any notice, circular, advertisement or other communication, inviting offers from the publish for the subscription or purchase of any shares.”
the objective of prospectus is to arouse the interest of the investors in the proposed company and to induce them to invest in this shares and bounds etc
the prospectus gives the details of the amount issued. the rights attached to the shares the property purchased, information about directors, auditors, bankers etc
if the company is already in operation and the offer for sale of shares is made, the the report of the auditors regarding profit and losses, assets and liabilities, the rate of dividend declared in the previous years etc is to be give,
Objective of Prospectus:
The objects of issuing prospectus are fourfold.
- To bring to the notice of the public that a new company has been formed.
- To convince those who have saving to invest about the genuineness of the company and its future prospects.
- To keep an authenticated record of the conditions on which the capital has been raised.
- To secure that the directions of the company accept responsibility for the statements in the prospectus.
Contents of Prospectus of a Company:
In contents, the detailed description regarding the establishment of the company , its characteristics and its estimated future is given. The important matters included in the prospectus are as follow.
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- Statement in lieu of prospectus
- What is a Joint Stock Company?
- Brief history and prospects, it includes:
- Brief history of company
- The main objects of the company
- The location of the plant
- Information about project , plant and its machinery raw material etc
- Economic justification and marketability of the goods to be produced.
- Capital structure.
Under this head information is provided regarding.
- Share capital of the company ; authorized, issued, subscribed and paidup capital, present issue offered for subscription.
- Basis of allotment of shares
- Facilities available to non resident for purchase of shares etc
- Information about the company management :
Under this head, complete information is provided about the history, main objects and present business of company. the experiment and background of the promoters, full addresses of the manager, managing director and other directors is provided.
- Details about the project:
The main information provided under this head is the cost of the project, the means of financing the project. Location of the project, utilities like water supply power, nature of the products etc
- Financial information :
Under financial information, the following particulars are provided.
- Auditors report
- Sharesholders equity and liabilities
- Auditor certificate on share capital
- Estimated cost of the project and the means of the finance.6. General information:
The main information provided under this head are.
- Appointment of chief executive
- Election of directors
- Power of directors
- Borrowing powers of the directors
- Voting rights
- Transfer of shares
- Quorum of general meeting
- Commission, brokerage and tax exemptions
This part contains the following information
- Commission to be paid to the bankers to the issue
- Tax exemption on investment on the shares of the company
- Exemption from custom duty and sales tax on plant and machinery if any.8. Board of directors:
Under this head, the names, addresses, and occupation of the board of directors is given.
- Interest of Directors:
This head provides information regarding:
- Interest of directors in dividends and other benefits.
- Remuneration to be paid to the chief executive, directors and the secretary.10. Miscellaneous:
the main contents under this head are;
- Place of registration office , factory
- Bankers of the company
- Bankers to the issue both local and foreigner
- Legal adviser, consultants to the issue etc
10. Application and allotment:
The procedure of applying for shares, their scrutiny and allotment of shares is made clear to the prospective investors in this section.