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Commercial Correspondence and Secretarial Practice · Class 11 Commerce

Ch 6Prospectus — Class 11 Commercial Correspondence and Secretarial Practice, concept-first.

A company that wants to raise capital from the general public - rather than from a handful of promoters or private investors - must first make a formal, public invitation explaining what it is offering and why the public should invest.

13

Q&A

6

Concepts

9m

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Key concepts

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Prospectus

A **prospectus** is any document described or issued as a prospectus — including a notice, circular or advertisement — that invites the public to subscribe to or purchase a company's securities, or to make deposits. It i…

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Chapter contents

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1

Meaning and Definition of Prospectus

A company that wants to raise capital from the general public - rather than from a handful of promoters or private investors - must first make a formal, public invitation explaining what it is offerin…

2

When a Prospectus Is Required

Not every company that wants money needs a prospectus. The requirement is tied directly to how a company proposes to raise funds.

3

Contents of a Prospectus

Section 26 does not leave the contents of a prospectus to a company's discretion - it prescribes, in considerable detail, the matters that must be stated and the reports that must be set out, so that…

4

Types of Prospectus

A company does not always issue one single, final prospectus document. The Companies Act, 2013 recognises several distinct forms a prospectus can take, each suited to a different stage or method of ra…

5

Statement in Lieu of Prospectus

Not every company that eventually lists on the stock exchange begins life by inviting the public. A private company may convert itself into a public company, or a public company may decide to allot it…

6

Mis-statement in a Prospectus: Civil and Criminal Liability

Because thousands of investors may commit their savings on the strength of a single document, the Companies Act, 2013 treats any untrue or misleading statement in a prospectus with real severity, and…

7

Private Placement - Raising Capital Without a Prospectus

Not every offer of securities is made to the public, and the Act draws a sharp line between the two routes.

Exercises

+Show 13 questions13 questions
  1. Q1Define a prospectus as per the Companies Act, 2013. What are its essential features?Free
  2. Q2When is a public company required to issue a prospectus, and why is a private company exempt?Free
  3. Q3State any five matters that the Companies Act, 2013 requires to be disclosed in a prospectus.Free
  4. Q4What is a deemed prospectus? Explain with an example.Preview
  5. Q5Explain shelf prospectus. What is its period of validity?Preview
  6. Q6What is a red-herring prospectus? How does it differ from an ordinary prospectus?Preview
  7. Q7What is an abridged prospectus, and why must it accompany every application form?Preview
  8. Q8What was a 'Statement in Lieu of Prospectus'? Is it still relevant under the Companies Act, 2013?Preview
  9. Q9Explain the civil liability for mis-statement in a prospectus under Section 35 of the Companies Act, 2013.Preview
  10. Q10What criminal liability does the Companies Act, 2013 impose for a mis-statement in a prospectus?Preview
  11. Q11State the defences available to a director against liability for mis-statement in a prospectus.Preview
  12. Q12What is private placement? Distinguish it from raising capital through a prospectus.Preview
  13. Q13Distinguish between a shelf prospectus and a red-herring prospectus.Preview