Q.What was a 'Statement in Lieu of Prospectus'? Is it still relevant under the Companies Act, 2013?
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Start your 14-day free trial to unlock the full solution →A company does not always raise its capital by inviting the general public. A private company converting into a public company, or a public company that allots its shares privately to promoters, financial institutions or a small group of investors, never makes an invitation to the public and therefore has no prospectus to issue in the ordinary sense. Yet the law still wanted some formal, filed disclosure before such a company could go ahead and allot its shares - precisely because no prospectus would otherwise exist to record and verify the company's affairs at the time of allotment.
Under the earlier Companies Act, 1956, this gap was filled by a document called the Statement in Lieu of Prospectus, which such a company was required to file with the Registrar of Companies before proceeding to allotment. It covered broadly the same ground as a prospectus - the company's capital structure, the names of its directors, the minimum subscription, and similar particulars - but it was addressed to the Registrar as a filing requirement rather than circulated to the investing public, since by definition no public invitation had been made. …
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