FINANCIAL STRUCTURE AND MEMBERSHIP - II - PROSPECTUS

FINANCIAL STRUCTURE AND MEMBERSHIP - II

PROSPECTUS - Section 2(36)

“Any document described or issued as a prospectus and includes as a prospectus and includes any notice circular, advertisement or other document inviting deposits from the public for the subscription or purchase of nay shares in, or debentures of a body corporate”

An offer or invitation to subscribe for shares or debentures made to fifty or more persons shall be treated as an offer or invitation made to public. – Section 67(3)

Prospectus not required to be issued- Section 56

Where a person is a bona fide invitee to enter into an underwriting agreement with regard to Shares and debentures, not offered to public, offered to existing holders.

Statement in lieu of Prospectus – Section 70(1)

All public companies either issue Prospectus or file a statement in lieu of Prospectus.

Prospectus must be dated- Section 55

Copy of underwriting agreement need to annex when prospectus filed with Registrar. Section 76 (1)(b)(v)

When Registrar must Refuse Registration – Section 60(3)

• It is not dated,
• non comply with Section 56,
• contains a report of experts engaged or interested in formation or promotion of the company- Section 57
• does not contain consent in writing of directors, auditors, legal advisor, banker, etc,

Shelf Prospectus – Section 60A

Prospectus issued by any financial institution or bank for issue of securities specified in prospectus. Validity of shelf prospectus is one Year

Information Memorandum – Section 60B 

Process undertaken prior to filing of a prospectus by which a demand for the securities proposed to be issued is assessed by means of a notice, circular, advertisement or document.

Deemed Prospectus – Offer for sale of existing shares – Section 64

Untrue statement – Section 65

Statement misleading in the form and content.

 Compensation of Untrue statement – Civil Liability - Section 62 and 56

An allottee is entitled to claim compensation for damages from directors, promoters and any person who authorized the issue of false prospectus.

Criminal Liability for Mis statement – Section 63

Imprisonment for Two years and / or fine up to Rs. 50,000.