Prospectus ‑ Advertisement in newspapers - Suggested proforma - Companies Law - No. 5(13)‑CL‑VI/62,

Circular : No. 5(13) ‑ CL ‑ VI/62, dated 21 ‑ 5 ‑ 1962. Subject:- Prospectus ‑ Advertisement in newspapers - Suggested proforma Attention is invited to Department s Circular Letter of even number dated 6‑2‑1962 [printed as Clarification 2] on the above subject. The matter has been reconsidered by the Government in detail in the light of the suggestions made by the Chambers and Stock Exchanges in reply to this Department s circular under reference. It would appear that some of these bodies have not fully appreciated the object underlying the proposal of this Department to evolve a suitable form of announcement in newspapers and other publications regarding the proposed issue of capital by a company. The object was three‑fold : (i) to induce the prospective investors to obtain copies of the prospectus relating to a particular issue and study the same before deciding to invest, (ii) to prevent the unwary among them from mistaking the press announcement which might contain most of the material generally found in a prospectus but might omit to give some vital information which a prospectus is obliged to supply, and (iii) to ensure that in making announcements in the press regarding the issue of prospectuses, company managements and promoters did not offend section 56 and any other applicable provisions of the Companies Act. As this Department has been advised that the announcement of the issue of capital being published by companies at present ‑ containing as they do copious extracts from the relevant prospectuses filed with the Registrar of Companies are not in conformity with law, it is regretted, it is not possible to agree to the suggestions of some Chambers that further information should be disclosed than that contemplated in the proforma circulated earlier. On a careful reconsideration of this question the Central Government are of the view that the balance of advantage would lie in disclosing only such essential information in the announcement as would arouse the interest of a prospective investor and induce him to ask for the full prospectus. With this end in view, the Government have devised a revised proforma as in the Annexure to this letter, and they would advise company management and promoters to make all future announcements regarding issues of capital in that form. In this connection, it may be stated that the adoption of the enclosed proforma is not obligatory but if any company chooses to make the announcement in the press in any other form, it would do so at its own risk. If such an announcement offends in any way the provisions of section 56, the directors and other persons concerned would render themselves liable to the penalties under the law and also to the payment of compensation to every person who subscribes for any shares or debentures of the company on the faith of the announcement. ANNEXURE : PROFORMA OF ANNOUNCEMENT REGARDING THE PROPOSED ISSUE OF CAPITAL 1. Name of the company and the address of the registered office 2. Existing and proposed activities 3. Location of the industry 4. Board of directors 5. Managing director/manager 6. (a) Authorised capital (b) Subscribed capital (c) Proposed issues to the public (whether at par, discount or premium) 7. Dates of the opening and closing of the subscription list 8. Application forms along with copies of the prospectus can be had from the registered office of the company or from the underwriters/bankers/brokers whose names and addresses are given below.