Distinguish between Prospectus and Statement in Lieu of Prospectus.

Question

Accepted Answer

Although a Prospectus and a Statement in Lieu of Prospectus serve the same underlying purpose — disclosure before shares are allotted — they apply in opposite situations:

| Basis of Difference | Prospectus | Statement in Lieu of Prospectus |
|---|---|---|
| When issued | When a public company invites the general public to subscribe for its shares or debentures | When a public company does NOT invite the public and instead arranges its capital privately |
| Audience | Circulated to the general public | Filed only with the Registrar of Companies; not circulated to the public |
| Subscription list | Opens a public subscription list, with stated opening and closing dates | No public subscription list, since there is no public invitation |
| Typical situation | A fresh public issue of shares or debentures | A private company that has converted into a public company but raises further capital privately |
| Liability for misstatement | Civil liability (Section 35) and, if fraudulent, criminal liability (Section 34), falling on the company, directors, promoters and any expert involved | Equivalent liability attaches to the persons who sign the Statement, for any untrue particular in it | …

Q.Distinguish between Prospectus and Statement in Lieu of Prospectus.

Concept understanding — Prospectus and Statement in Lieu of Prospectus

Basis of Difference	Prospectus	Statement in Lieu of Prospectus
When issued	When a public company invites the general public to subscribe for its shares or debentures	When a public company does NOT invite the public and instead arranges its capital privately
Audience	Circulated to the general public	Filed only with the Registrar of Companies; not circulated to the public
Subscription list	Opens a public subscription list, with stated opening and closing dates	No public subscription list, since there is no public invitation
Typical situation	A fresh public issue of shares or debentures	A private company that has converted into a public company but raises further capital privately
Liability for misstatement	Civil liability (Section 35) and, if fraudulent, criminal liability (Section 34), falling on the company, directors, promoters and any expert involved	Equivalent liability attaches to the persons who sign the Statement, for any untrue particular in it

Q.Distinguish between Prospectus and Statement in Lieu of Prospectus.

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