It is an appeal to the public to subscribe to shares or debentures offered to them. Meaning of prospectus according to The Companies Act: It is any prospectus, notice, circular, advertisement, or other invitation offering to the public for subscription or purchase of any shares or debentures of a company.
Here it is to be noted that the prospectus shall not include any trade advertisement. The main objectives of the prospectus are to persuade the people to purchase shares and to give all necessary information to guide the potential investors. Let’s know detail about the meaning of prospectus.
Meaning of prospectus
A public limited company, after its registration, issues the prospectus to the public with a view to drawing their attention and creating confidence in their minds for subscribing shares on behalf of a company.
It shall be dated and the date shall be taken as the date of publication of the prospectus. A copy of every prospectus, signed by every person who is named therein as a director or prospectus.
A copy of every prospectus, signed by every person who is named therein as a director or proposes director or by his agent authorized in writing, shall be filed for registration with the register on or before the date of its publication.
No such prospectus shall be issued until a copy thereof has been so filed for registration.
A prospectus should disclose all material facts and figures of a company. Every person who is a director of the company at the time of the issue of the prospectus or any person connected with the issue of the prospectus shall be liable to pay compensation to all persons who subscribe for any shares or debentures on the faith of the prospectus for all loss or damage they may have sustained by reason of an or untrue statement therein.
Contents of the prospectus:
- The contents of the memorandum, with the names. descriptions and addresses of the signatories of the memorandum and the number of shares subscribed by them.
- The names, description, and address of the directors, managers, managing agents (if any) or proposed directors, and the remuneration payable to them.
- The minimum subscription on which the company may proceed to allot shares and the amount payable on application and allotment on each share.
- Where any issue of shares or debentures is underwritten, the names of the underwriters and an assurance that the underwriters are ready to discharge the underwriting obligations.
- The names and addresses of the vendors of any property purchased or acquired by the company or proposed to be purchased.
- The amount or estimated amount of preliminary expenses.
- The names and addresses of the auditors, or bankers of the company.
- Full particulars of nature and extent of the interest of every director; in the promotion of, or in the property proposed to be acquired by the company.
- A statement that a copy of the prospectus has been filed with the register.
These points have been considered necessary so that there may not be any suppression or exaggeration of facts regarding the company.
Although these provisions are not enough, yet they act as a sort of warning to potential investors.
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