2. Definition
• Prospectus means any document described
and issued as prospectus and includes any
• notice,
• circular,
• advertisement or other document
• inviting deposit from public or inviting offers
from public for subscription or purchase of
any share or debenture of a body corporate.
Section
2 (36)
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3. Importance of Prospectus
Prospectus is an invitation to offer. Persons responding
to such invitation make an offer to buy shares or
debentures. Allotment is acceptance of such offer.
All material facts shall be disclosed with scrupulous
accuracy. Since prospectus tends to create contract.
Terms of contract mentioned in the prospectus shall not
be varied without the approval and authority of the
company in general meeting (Section 61).
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5. Section 67 (1) & Proviso to S 67(3)
• An invitation to public means an invitation
to any section of public selected as
members, debenture holder or client of the
company
Section
67 (1)
• An invitation to subscribe to shares or
debenture made to 50 or more people
shall be treated as invitation to public by
companies other than non banking
financial companies and public financial
institutions.
Proviso
to
Section
67 (3)
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6. Offer to Public – Who Accepts
If an invitation or offer cannot be calculated to result either
directly or indirectly in the shares or debentures becoming
available for Subscription or Purchase by a person other
than those receiving the invitation or offer, then it shall not be
treated as invitation to public(Section 67(2)).
The true test for determining an offer to public is not who
receives the offer or invitation BUT who can accept it.
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7. Important Cases
1
• A single private communication marked “confidential” passed on hand to
hand does not amount to invitation to public though it may contain
proposed issue of shares (Nash v Lynde)
2
• Offering share to kith & kin to directors is not a invitation to public (Ratan
Sigh Vs Moga transport co.ltd.)
3
• Determination of question of offer to public depends upon the facts and
particular circumstances and language of notice in each case. (Ratan
sigh v Moga transport co. Ltd)
4
• An offer to share holders of an existing company, the shares of the new
company, in exchange of the shares of existing company, is not an
invitation to public.(Govt. securities and Investment co.ltd V Cristopher)
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9. Introduction
PART I: General Information
PART II: Financial and
statutory information
PART III: Interpretation and
explanations
Prospectus issued by the
PUBLIC COMPANY shall
contain information, matters
and reports as required in
SCHEDULE-II which is divided
into 3 parts.
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10. Part I
Information about the company generally.
Capital structure
Terms of issue
Particulars of issue.
Company Management and Project.
Particulars about the issue made in the last three years.
Details about outstanding litigation, Criminal Prosecution if any
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11. Part II: Details of reports such as,
A. General information
Name and address of Company secretary, Legal advisor,Lead managers,Bankers to the
company,Bankers to the issue and auditors.
Procedure and time schedule for allotment
Authority for the issue
Expert opinion if any
Consent of directors, auditors, advocates and managers to the issue.
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12. PART II: B. Financial information:
Report by Auditors w.r.t Profit and Loss
and Assets and Liabilities
Rate of dividend paid in each of the
preceding five financial years.
Financial details of subsidiary companies if
any.
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13. Part II: C. Statutory and other Info.
Minimum subscription
Expenses indicating separately the fee payable to advisors, registrar to the
issue, managers to the issueand trustees for debenture holders.
Underwriting commission
Purchase of property
Revaluation of assets
Material contracts etc.
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14. Part III
Interpretation and explanations to
certain terms used in PART I and
PART II.
It shall indicate reasonable time
and place at which copies of all
Balance sheets, Profit and Loss
Account, if any on which the
report of the auditors is based
and material contracts and other
documents may be inspected.
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