What is Prospectus of the Company?

Introduction 

After having obtained the certificate of incorporation, the promoters of a public company will have to take steps to raise the necessary capital for the company. A public company may invite the public to subscribe to its shares or debentures. For this purpose a documents known as Prospectus has to be issued.

Public company which can manage its own capital privately need not to issue prospectus. But in such a case, a statement in lieu of prospectus must be filed with the Registrar. A private company is not allowed to issue a prospectus since it cannot invite general public to subscribe to its shares or debentures.

Prospectus is a document containing detailed information about the company and an invitation to the public for subscribing to the share capital and debentures issued is called prospectus.

According to Section 2(36) of the Companies Act-“ Prospectus means any document described or issued as a prospects and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscriptions or purchase of any shares in or debentures of a body corporate”.

Objects of Prospectus:-

• To bring to the notice of the public that a new company has been formed.
• To preserve an authentic record of the terms and allotment on which the public have been invited to
  buy its shares or debentures.
• To secure that the directors of the company accept responsibility of the statement in the prospectus.
• It is an invitation issued to the public to purchase or subscribe shares or debentures of the
  company.
• Every prospectus must be dated. The date of publication and the date of issue must be
  specifically stated in the prospectus.
• The golden rule of the prospectus is that every detail has to be given in strict and scrupulous
  accuracy.

Nature of prospectus: –

A document is not prospectus unless it is an invitation to the public to subscribe for shares in, or debentures of a company.

Contents of the Prospectus:-

• General information
• Capital structure
• Terms of present issue
• Management and projects
• Management and perception of risk factor

It is compulsory to register the prospectus with the Registrar.

Civil Liability for Misstatements:-

In case of any untrue statement in the prospectus:

• The liability will be on the director of the company , whose name was written during the time of issue
• The persons who have authorized their names to be theirs in the prospectus to be named as directors
• Promoter
• Every person including the person who is an expert and has authorized his name to be issued with the prospectus.