According to Sec. 2 (36), 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.

1. Prospectus

2. Definition
• According to Sec. 2 (36),
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.

3. Definition
• An advertisement
offering to the public,
shares or debentures of
the company for sale, is
a prospectus.

4. Rules regarding the issue of
prospectus
• Registration of prospectus.
• Time limit for issue of
prospectus
• Purpose of registration of
prospectus.
• Particulars of records to be
furnished.
• Dating of prospectus.
• Penalty of non registration of
prospectus.
• Registrars refusal to register.

5. Registration of prospectus
• A copy of the prospectus
duly signed by every
director or proposed
director or his agent, must
be delivered to the Registrar
for registration before its
publication.

6. Time limit for issue of prospectus
• The prospectus must be
issued within 90 days of
the date of which a copy
thereof is delivered for
registration.

7. Purpose of registration of prospectus.
• Registration of prospectus
presents an authoritative
record of the terms and
conditions of the capital
issue.

8. Particulars of records to be furnished.
• (a) consent in writing of the
expert (b) copy of every
material contract relating to
appointment and remuneration
of managerial personnel (c) a
written statement relating to
adjustment if any and (d)
consent in writing of auditors,
legal advisors and bankers.

9. Dating of prospectus
• Every prospectus must be
dated. This date shall be
taken as the date of
publication of prospectus.

10. Penalty of non registration of
prospectus.
• If a prospectus has been
issued without it being
registered, the company
and every person party to
the issue of the prospectus
shall be punishable with
fine which may extend to
Rs. 50 thousand.

11. Registrars refusal to register
• Registrar can refuse to
register if any of the
following rules are
violated.

12. Contents of Prospectus
• Name and address of the
registered office of the
company.
• Main objects of the company
with names, addresses and
description and occupations of
the signatories.
• The number and class of shares.
• Remuneration of directors.
• Minimum amount of
subscription to be raised when
shares are offered to the public.

13. Contents of Prospectus
• Amount to be shared on
application and allotment of
each share.
• Details of every contract
with the company.
• Name and address of
auditors and lead managers.
• Time and place where the
contracts may be inspected.
• Nature and extend of the
restrictions imposed upon
the members of the
company.

14. Types of prospectus
• Abridged prospectus.
• Shelf prospectus.
• Red Herring Prospectus.
• Deemed prospectus.

15. Abridged prospectus
• The companies Act of 1988
provided for the
companies to furnish along
with the application form
for shares or debentures,
an abridged form of the
prospectus, instead of the
complete prospectus. It
should contain all the
relevant details as laid
down in the information
memorandum.

16. Shelf prospectus
• Shelf prospectus means a
prospectus issued by any
financial institution or bank
for one or more issues of
securities or class of
securities specified in that
document. It enables public
financial institutions and
banks to raise capital from
the public more than once
without issue of fresh
prospectus every time.

17. Red Herring Prospectus
• A company may issue a
prospectus called red
herring prospecus before
the actual opening of the
subscription list along with
an information
memorandum. It gives
only a general idea about
the securities.

18. Deemed prospectus
• When a company allot its
shares to an intermediary
called issuing house for
offering them for sale to
the public, the document
by which the offer is made
to the public by the issuing
house is called deemed
prospectus.

19. Misstatement in prospectus
• Misstatement includes
– Untrue statement.
– Statement which produce
wrong impression.
– Statement which are
misleading.
– Concealment of material
facts.
– Omission of facts.

20. Effect of misstatement
• A misleading statement in
the prospectus make the
company liable to the
shareholders and the
shareholders may on the
grounds of
misrepresentation rescind
the contract and may claim
the money deposited with
the company.

21. Remedies of misstatement
Remedies against the
company
Remedies against the directors,
promoters and experts
1. Suit for compensation.
2. Suit for damages for
misrepresentation.
1. Rescission of the contract.
2. Suit for damages.

22. Rescission of the contract
• When a prospectus
contains a misstatement,
the person who is induced
by such misstatement to
subscribe to shares or
debentures is entitled to
rescind the contract.

23. Suit for damages
• A subscriber is entitled to
claim damages from the
company apart from
rescinding the contract

24. Suit for compensation
• All these people will be
liable to pay compensation
to any and every person
who subscribed for shares
or debentures placing
reliance on the prospectus.

25. Suit for damages for
misrepresentation
• Section 62 imposes liability
on the directors or
promoters if there is an
untrue statement in the
prospectus.

26. Statement in lieu of prospectus
• If the promoters of a public
company are confident of
raising the required capital
privately, no prospectus
need be issued to public. In
such case, they are to
prepare a draft prospectus
containing the information
required to be disclosed.
This document is called
Statement in lieu of
prospectus.