The document provides guidance on preparing a prospectus when issuing shares or securities to the public. It explains that a prospectus must be approved by regulatory authorities, include specific required information, and be registered before the company can issue shares. The prospectus format is regulated and it must not omit any material details to prevent misleading investors. It also discusses related terms like red herring prospectus, shelf prospectus, and statement in lieu of prospectus.

1. HOW TO PREPARE A PROSPECTUS ? by : DR. T.K. JAIN AFTERSCHO ☺ OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR – PGPSE PARTICIPANTS mobile : 91+9414430763

2. WHAT IS A PROSPECTUS? WHEN A PUBLIC COMPANY ISSUES SHARES / DEBENTURES / ANY OTHER SECURITY, IT HAS TO ISSUE PROSPECTUS / RED HERRING PROSPECTUS / STATEMENT IN LIEU OF PROSPECTUS.

3. CAN A PRIVATE COMPANY ISSUE PROSPECTUS? NO

4. CHARACTERISTICS Signed by directors + CS must bear a date must be as per SEBI guidelines + companies act must be registered with ROC it is a public invitation

5. Attachments to prospectus Schedule II Expert consent (if they have given any statement) (sec. 56) copy of contracts consent of auditors / legal advisors

6. Approval of prospectus Lead financial institutions lead managers to issue stock exchanges (where the company is listed / proposed to be listed) vetting by SEBI

7. Submission to ROC Before issue of prospectus, it should be submitted to ROC (sec. 60) from this date, prospectus has to be issued to public in 90 days. If issued without registration (with ROC), penalty on officer – 50000

8. Format Click the links below : http://www.moneycontrol.com/ipo/ipofaq.php http://www.sebi.gov.in/dp/usheragro.pdf http://www.sebi.gov.in/dp/power.pdf http://www.sebi.gov.in/dp/power.pdf

9. PART I OF SCHEDULE II Capital structure issue guidelines minimum subscription date of opening and closing of issue risk perception of management general information & litigation matters names of stock exchanges etc.

10. PART II OF SCHEDULE II CONSENT OF EXPERTS CONSENT OF DIRECTORS REPORT OF AUDITORS & ACCOUNTANTS TERMS OF LOANS

11. Sebi guidelines http://www.sebi.gov.in/SectIndex.jsp?sub_sec_id=4

12. What is minimum subscription It must be mentioned in prospectus – as per SEBI guidelines : 90% is minimum subscription

13. Issue norms Issue norms must be given in prospectus. Issue must be made in 30 days of public issue closure (otherwise penal interest @15%) refund orders (if any must be despatched in 78 days). Allotment must be made by board of directors / proper authority

14. GOLDEN RULE Kindersely : in Brunswick etc. v/s Muggeridge (1860) : the person issueing prospectus must give every information stricktly and scrupulously and must not omit any material information

15. Important rules Experts opinion only after obtaining written consent by experts Director names only after obtaining written consent by director to become the director the experts mentioned must not be connected to formation of the company (indemnify if there is false information)

16. When can registrar refuse to register a prospectus It is not dated it is not signed it is not accompanied with documents it is not as per company law & SEBI guidelines

17. WHAT IS RED HERRING PROSPECTUS IT GIVES RATES IN RANGE – IT IS NOT GIVING FINAL RATES OF ISSUES

18. SHELF PROSPECTUS SEC. 60 a (as per 2000 amendment of companies act) : when a bank / public financial institution repeatedly issues capital, it can issue shelf prospectus it is valid for 1 year – during this time, the company can again and again go for public issue on the basis of same shelf prospectus, but each time it has to issue information memorandum (sec. 2(19B)

19. STATEMENT IN LIEU OF PROSPECTUS 1. when a private company becomes a public company (within 30 days) 2. when public company is not issueing shares to public, they have to issue this. 3. when a public company doesnt allot shares to public it must have contents similar to prospectus, penalty if untrue statement : 10000 http://www.vakilno1.com/bareacts/companiesact/s44.htm

20. BE A PROMOTOR A Promotor is a person who sets up a company. As a promotor, you have to think about the idea and convert this idea into a company. As a promotor, you have to set up initial contracts so that company becomes operational.

21. Steps ...... Prepare Memorandum of association (as per format) in at least 3 copes Prepare Articles of association (as per format) in at least 3 copes (or apply Table A of schedule I) Prepare agreements with directors Submit declaration to Registrar of company that all formalities have been fulfilled (by company secretary) prepare prospectus go ahead for raising money for your dream ideas

22. LEGAL FORMS Form NO. 1 : declaration of all the formalities of company (to be filed with registrar of comapnies ). for other forms and their structure, click on the following link : http://www.mca.gov.in/MCA21/dca/downloadeforms/Download_eForm_choose.html http://www.vakilno1.com/froms_html/co_form.htm

23. INCORPORATION Registrar of companies will issue a certificate of incorporation. (Sec. 33, 34 of companies act) this is conclusive evidence that the company is registered.

24. Can you start a business ? Private company can start it immediately on getting certificate of incorporation, but a public company will have to obtain a certificate of commencement of business to start business. See this link also : http://www.legalserviceindia.com/company law/company_formation_procedure.htm

25. Commencement of business Public company can start business only on fulfilling following formalities : 1. directors have purchased qualification shares 2. prospectus / statement in lieu of prospectus has been prepared and submitted 3. minimum subscription has been obtained.

26. PRELIMINARY CONTRACTS These contracts are made before a company has been given certificate of incorporation. These contracts have no legal validity against company and the contractor cannot sue the company. The promotors are personally liable for such contracts.

27. PROVISIONAL CONTRACTS (ONLY FOR PUBLIC COMPANY) These contracts are made before a company has been given certificate of commencement of business but after certificate of incorporation. These contracts have no legal validity against company until the company obtains certificate of commencement of business. Once the company obtains this certificate – these contracts are enforceable against company.

28. FORMAT OF MEMORANDUM MOA must be in following format : Schedule I : Table B / C / D / E B : for limited by shares C : for guarantee D : guarantee + share capital E : for unlimited company

29. MOA Memorandum of association must have : NAME PLACE OBJECT LIABILITY CAPITAL SIGNATURE AND ASSOCIATION CLAUSE

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