Professional Documents
Culture Documents
A documents through which public are solicited to subscribe to the share capital
of a corporate entity is called “prospectus”. The purpose of a prospectus, issued
under the provisions of the Companies Act, 1956, is to invite the public for the
subscription/purchase of any securities (shares/debentures) of a company. The
form and the contents of the prospectus are prescribed by Part I of Schedule II of
the Companies Act.
Contents:
The nature of contents of prospectus (offer document) varies with the nature of
issue made by the company take the following forms:
Regular prospectus:
The contents of a prospectus regular prospectus are presented in three parts:
PART 1
Part 1 of the prospectus should contain details about specific information about
the company. The are details furnished in this regard.
A. General information:
The prospectus in its part 1 shall contain such information as the following:
1. Name of address of the registered office of the company.
2. Consent of the Central Government (SEBI) for the present issue and
declaration of Central Government about non-responsibility for financial
soundness or correctness of statements and letter of intent/industrial
license.
3. Names of regional stock exchanges and other stock exchanges where
application has been made for listing of present issue.
4. Provisions of sub-section (1) of Section 68A of the Companies Act relating
to punishment for fictitious applications.
5. Statement/declaration about refund of the issue if minimum
subscription of 90 percent is not received within 90 days of closure of
the issue.
6. Declaration about the issue of allotment letters/refunds within a
period of 10 weeks and interest in case of any delay in refund at the
prescribed rate.
7. Date of opening and closing of the issue, and date, of earliest closing of
the issue.
8. Name and address of auditors and lead managers.
9. Name and address of trustee under debenture trust deed (in case of
debenture issue).
10. Whether rating from CRISIL or any rating agency has
been obtained for the prop debenture/preference shares issue.
11. Underwriting of the issue (names and addresses of the underwriters
and the amount them and declaration by board of directors that the
underwriters have sufficient resources to discharge obligations).
B.Capital Structure
Information about the company's capital structure such as authorized,
issued, subscribed, and paid-up should be furnished. In addition, information
about the size of the present issues giving separately, for preferential
allotment to promoters and others, paid-up capital after the present issue
and after conversion of debentures, if applicable.
1. History and main objects, and present business of the company and
subsidiary of the company if any.
2. Promoters and their background.
3. Names, addresses and occupation of the manager, managing director
and other directors, including nominee director
4. Nominee directors, whole-time directors, (giving their directorship in other
companies).
5. Location of project, with details of plant and machinery, technology
process, etc.
6. Collaboration, any performance guarantee or assistance in marketing by the
collaborators.
7. Infrastructure facilities for raw material and utilities like water and
electricity.
9. The profile of the products mentioning such details as the nature of the
products/consumer/ industrial and end-users, approach to marketing and
proposed marketing set up, and export possibilities and export
obligations, if any.
10. Future prospects like capacity utilization during the first three years from
the date of commencement of production and the expected year when the
company would be able to earn cash profits and net profits.
11. Stock market data for shares/debentures of the company high/low
prices in each of the last 3 years and monthly high/low during the last six
months
F. Disclosure of Public Issues made by the Company:
Information about public issues that have been already made, listed under the
same management, within the same meaning of Section 370(1 B) shall be
furnished. The information required to be given includes year and type of .
amount of issue, date of closure of issue, date of completion of delivery of
share/debenture certificates, of completion of project where the issue was made
for financing a project and rate of dividend paid.
reasons thereof.
3. Authority for the issue and details of resolutions passed for the issue.
4. Procedure and time schedule for allotment and issue of certificates.
5. Names and addresses of the company secretary, legal advisors, lead
managers, co-mangers, auditors, bankers to the company, bankers to the
issue. and brokers to the issue.
B. Financial Information:
Under this category report-based information relating to financial matters are to
be shown. Following information in this regard:
Auditors' report A report by the auditors of the company with respect to
the profits and losses the five financial years preceding the issue of
prospectus must be included in the prospectus. The report should contain
details about the rates of dividend paid on each class of shares in respect
of minimum aggregate period of five years. The report should also give
statement of assets and liabilities as on the last date of the latest financial
year. The report should indicate the nature of any losses, and assets and
liabilities. Assets and liabilities of the subsidiaries as on the last date to
which accounts of the company were made up, must be shown in a like
manner.
• Minimum subscription
PART III
The requirement of this section of the prospectus is that the report by the
accountants under Part II must be by qualified practicing chartered accountant.
The time and place at which copies of all balance sheets J!ld profits and loss
accounts, materials contracts and documents. etc. to be inspected should also
be specified under Part 111.
Declaration
Prospectus must contain a declaration by the directors that all the relevant
provisions of the Companies Act, 1956and guidelines issued by the Government
(SEBI) have been complied with.
ABRIDGED PROSPECTUS
A memorandum containing such salient features of a prospectus as may be
prescribed is called 'Abridged Prospectus'. The concept of abridged
prospectus was introduced by the Companies (amendment) Act of 1988 with a
view to make the public issue of shares an inexpensive proposition. Accordigly, a
document has to be sent along with the application forms showing a brief
version of the salient features of the prospectus. One abridged prospectus can
carry two application forms.
An abridged prospectus must contain the following particulars:
A. General Information
File general information to be provided in this type of prospectus includes
the name and address of the registered office of the cornpany -. Name of the
stock exchange where shares are to be listed , date of opening and closing of
issue.
1.