Brief explanation of Prospectus, including it's contents, objectives and statement in lieu of prospectus.

1. PROSPECTUS

2. INTRODUCTION
A document is issued containing detailed
information about the company and an
invitation to the public subscribing to the
share capital and debentures which is known
as prospectus.
 If the promoters are confident of obtaining
the required capital through private contacts,
even a public company may not issue a
prospectus.

3.  The promoters prepare a draft prospectus
containing required information and this
document is known as ‘a statement in lieu of
prospectus’.
 A prospectus should have the following
essentials:
1. There must be an invitation offering to
the public.
2. The invitation must be on behalf of the
company or intended company.
3. The invitation must to be subscribed or
purchase.
4. The invitation must relate to shares or
debentures.

4.  Case of Parmathan Nath Sanyal Vs. Kali
Kumar Dutt, 1925
 Under Section 42, the prospectus must be
issued to a public at large and not to any
section of the public.

5. OBJECTIVES FOR ISSUE OF PROSPECTUS
 It informs the company about the formation
of a new company.
 It serves as written evidence about the
terms and conditions of issue of shares or
debentures of a company.
 It induces the investors to invest in the
shares and debentures of the company.
 It maintains all authentic records on the
issue and makes the directors liable for the
mis-statement in the prospectus.

6. CONTENTS OF PROSPETUS
Section 26 of the Companies Act provides that every
prospectus must disclose matters specified in Schedule II
of the Act. This schedule contains three parts:
PART I – (contains general information)
o General information about the issue.
o Capital structure of the company.
o Terms of present issue.
o Particulars of the issue.
o Company’s management and projects.
o Details of past issues of shares of the company and other
listed companies under same management, made during
past three years.
o Outstanding litigations, criminal prosecutions and
defaults in statutory and other dues.
o Management perception of risk factors.

7. PART II – (contains reports to be set out)
o General information about consent of directors,
experts, auditors, Company Secretary, etc.
o Audited financial statements of last five years.
o If the purpose of issue of shares is to purchase of
business or acquiring controlling shares in other
company so that it becomes subsidiary.
o Principal terms of loans and assets charged as
security
o Statutory information about the issue like
minimum subscription, expenses of issue,
underwriting, etc.
o Details about property proposed to be
purchased, Directors and their remuneration,
important contracts, etc.

8. PART III – (This part gives explanations
about requirement of contents of Part I
and II)
o If company is working for less than five
years, then details about years in which it
has worked should be given.
o The accounting details should be certified by
Chartered Accountant.
o Financial statements and copies of material
contracts and other documents specified in
prospectus should be open for inspection and
time and place when these will be available
for inspection must be specified in the
prospectus.
o A declaration that all relevant provisions of
Companies Act and guidelines issued by
Government have been complied with.

9. STATEMENT IN LIEU OF PROSPECTUS
 Must be filed with the registrar of companies
at least three days before first allotment of
shares.
 Signed by every person who is named
therein as a director or proposed director of
the company.
 Drafted strictly in accordance with the
particulars set out in a part I of Schedule II
of the Companies Act, 2013.

10. LIABILITY FOR MIS-STATEMENTS IN
PROSPECTUS
According to Section 65(1) a statement
included in a prospectus shall be deemed to
be untrue, if the statement is misleading in
the form and context in which it is included.
For this purpose the affected party must prove
that:
o The mis-representation was of material fact.
o He acted on the misrepresentation, and
o He has suffered damages in consequence.

11. Liabilities for mis-statement in a
prospectus:
I- Civil liability:
1. Against the company:
(a) To rescind the contract to take the
shares.
(b) To claim Damages.
2. Against the directors, promoters and
experts:
(a) Compensation under Section 62.
(b) Damages for non compliance (Section
56).
(c) Damages under general law.
II- Criminal liability

12. Thank You……