Prospectus Of company Law – MODDING ZONE

Prospectus Of company Law

According to Section 2(36) of the Indian Companies Act, 1956. Prospectus means document described or issued as prospectus and includes any notice, circular, advertisement or other document inviting deposit from the public or inviting offers from the public from the subscription or purchase of any shares in; or debentures of a body corporate.

When a company gives its sanction for allotment of its shares or debentures for the purpose of purchasing by the public, then such document by which the public is suggested to send the company’s shares or debentures, is defined as prospectus of that company. Such document must not be applicable for personal distribution only. It can be possible that it might have been extended in a limited portion. One thing more regarding the prospectus is this that until it is not issued to be public, the provisions of the Companies Act pertaining to the prospectus cannot be applied to that company. Whether the issue of prospectus is made or not it depends upon the facts of each context and its firm explanation is not possible.

Contents of prospectus – There are the following pro-visions in the Companies Act regarding the contents of the prospectus so that the persons willing to invest capital in the company may get sufficient protection-

(1) Each prospectus must necessarily be marked with date so that firm knowledge be obtained that on which date it has been published.

(2) Registration of each prospectus is essential. According to Section 60 of the Indian Companies Act, each prospectus must be signed by all the directors or proposed directors of the company or the authorised agent and just after issue of the prospectus it is necessary to get it registered in the office of the Company Registrar.

The following documents must also be attached with the copy of the prospectus to be submitted for registration.

1. A copy of the contract pertaining to the remuneration of the managers,

2.If the name of a banker, legal advisor or accountant is referred to in the prospectus, then their written agreement must also be submitted alongwith the prospectus,

3.If report of an expert regarding the business of the company to get published then the acceptance of that expert,

4.One copy of each contract other than the contracts or journal made two years back under the general behaviour by the company,

5.One copy of the application for purchasing shares must also be attached with the prospectus.

If a company or its an officer issues the prospectus without getting it registered violating Section 60 of the Act then that company or each related guilty officer shall be penalised with Rs. 5000/- Normally it must have been printed on the front page of the prospectus that it is registered and all the requisite documents have been submitted to the company registrar alongwith this.

(3) Expert’s Statement – According to Section 58, if there is any such statement in the prospectus of a company which is equivalent in the opinion of the experts, then it shall be necessary for the company to get written acceptance of that expert and it shall have to mention this fact expressly in its prospectus, but the expert must not be such a person who himself is having an interest in the operation, improvement or management-ruling of the Company. There is its legal importance because of this that by this the persons willing to invest capital in the business of the company get security because they can declare that export as responsible for faulty statement by making him a party issuing the prospectus.

(4) Index of prospectus- According to Section 56 of the Indian Companies Act, express description of all thosebpoints is necessary in the prospectus of the company which are referred to in Schedule II of the Act. This schedule is divided in three parts. In first part those points are included which are necessarily to be mentioned by the company in its prospectus. According to Part I of the Schedule II the following points must be available in the prospectus-

(1) Names, addresses of the signatories on the memorandum of the company and the number of shares requested by them and the main objects of the company.

(2) The number of shares of different types to be issued by the company and the interest to the shareholders by property and profit of the company.

(3) Number of redeemable preference shares of the fixed period and the date of redemption of these shares and requisite information.

(4) If there is a proposal of selling the shares to the public then the amount of minimum subscription must be mentioned which may necessarily to be procured by the company to start the business.

(5) Names, remunerations and addresses of the directors.

(6) Opening date of subscription list.

(7) If an individual has been provided with special preference in the sequence of shares then description thereof or an option provided to it.

(8) Amount to be paid on each share and at the time of allotment. If the allotment of the shares is being made again then it shall be mentioned that the shares of how much amount were issued during two years of the allotment and what was number of the shares and the allotment of how much amount was made.

(9) Description of the premiums of the shares received or to be received during last two years.

(10) Number of such shares or debentures which were issued for any other consideration other than cash during two year

11.Description of those sellers Who have sold any company or ready to sell and the payment of that cost is made out of the income of resources.

(12) Preliminary expenses of the company.

(13) The amount paid or to be paid to the convenerstion of any other profit given to them.

of the company during the period of two years and descrition counts and other details of the company may be available

(14) Rights of the shareholders regarding voting and attendance in the meeting, and rules and restrictions regarding right of votes.

(15) Restriction on transfer of shares.

(16) Restriction on the rights of the directors in the

(17) Description of that place or time where the acand these can be examined.

(18) Names and addresses of the auditors of the company.

(19) If the capital is procured out of the reserve treasury or profits of the company, then the details thereof.

(20) Other informations which are considered by the company necessary to get published to attract the public.

According to Part 2 of Schedule II, the following must also be described in the prospectus-

(1) The report of the accountant of the company that what were the profits and losses to the company during last five financial years and what is the position of its finance and liabilities.

(2) Report of the company given by the auditors regarding profit, loss and assets and liabilities of the company. Description of rate of bonus given on the shares of each class of the company during five financial years from the date of issue of the prospectus must be given in the report.

(3) If the company intends to start a special business, then the accountant shall have to mention regarding this in his report. Name of the accountant must also be clearly mentioned.

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