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The Tax Publishers 1. Document called prospectus Prospectus is the document through which shares are offered to public for subscription. The Companies Act, 1956 contains elaborate provisions as regards prospectus and these provisions are enshrined in sections 55 to 68A. The provisions contained in the Companies Act, 1956 regarding prospectus are applicable to both listed and unlisted companies. However, in case of companies which desire to get listed on Stock Exchange(s), the SEBI has stipulated numerous disclosure requirements. The contents of this chapter have been confined only to the provisions regarding prospectus as contained in the Companies Act, 1956. Prospectus is the window through which a prospective investor looks into the soundness of the company and it forms the basis for forming opinion and taking decisions of making investments in the company concerned. A private company need not issue a prospectus as it cannot invite public to subscribe to its shares or debentures. [Section 3(1)(iii)] The term prospectus has been defined in section 2(36) of the Act as follows : 'Prospectus means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of a body corporate. The Companies (Amendment) Act, 2000 had inserted section 2(1), which defines 'abridged prospectus'. Accordingly, abridged prospectus' means a memorandum containing such salient features of a prospectus as may be prescribed. Whereas a private company cannot issue a prospectus, a public company has an innate power and privilege to issue prospectus to public for subscription of shares in or debentures of the company. The prospectus of a public company shall contain matters specified in Part I of Schedule II and shall set out the reports specified in Part II of Schedule II to the Companies Act, 1956. If a public company does not issue a prospectus with reference to its formation then it has to file a statement in lieu of prospectus with the concerned Registrar of Companies. Section 70(1) stipulates that a company having a share capital, which does not issue a prospectus on or with reference to its formation, or which has issued such a prospectus, but has not proceeded to allot any of the shares offered to the public for subscription, shall not allot any of its shares or debentures unless at least three days before the first allotment of either shares or debentures, there has been delivered to the Registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in Part I of Schedule III and, in the cases mentioned in Part II of that Schedule, setting out the reports specified therein, and the said Part I and II shall have effect subject to the provisions contained in Part III of that Schedule. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers 1. Document called prospectus

Prospectus is the document through which shares are offered to public for subscription. The Companies Act, 1956 contains elaborate provisions as regards prospectus and these provisions are enshrined in sections 55 to 68A. The provisions contained in the Companies Act, 1956 regarding prospectus are applicable to both listed and unlisted companies. However, in case of companies which desire to get listed on Stock Exchange(s), the SEBI has stipulated numerous disclosure requirements. The contents of this chapter have been confined only to the provisions regarding prospectus as contained in the Companies Act, 1956. Prospectus is the window through which a prospective investor looks into the soundness of the company and it forms the basis for forming opinion and taking decisions of making investments in the company concerned. A private company need not issue a prospectus as it cannot invite public to subscribe to its shares or debentures. [Section 3(1)(iii)]

The term prospectus has been defined in section 2(36) of the Act as follows :

'Prospectus means any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in, or debentures of a body corporate.

The Companies (Amendment) Act, 2000 had inserted section 2(1), which defines 'abridged prospectus'. Accordingly, abridged prospectus' means a memorandum containing such salient features of a prospectus as may be prescribed.

Whereas a private company cannot issue a prospectus, a public company has an innate power and privilege to issue prospectus to public for subscription of shares in or debentures of the company. The prospectus of a public company shall contain matters specified in Part I of Schedule II and shall set out the reports specified in Part II of Schedule II to the Companies Act, 1956. If a public company does not issue a prospectus with reference to its formation then it has to file a statement in lieu of prospectus with the concerned Registrar of Companies.

Section 70(1) stipulates that a company having a share capital, which does not issue a prospectus on or with reference to its formation, or which has issued such a prospectus, but has not proceeded to allot any of the shares offered to the public for subscription, shall not allot any of its shares or debentures unless at least three days before the first allotment of either shares or debentures, there has been delivered to the Registrar for registration a statement in lieu of prospectus signed by every person who is named therein as a director or proposed director of the company or by his agent authorised in writing, in the form and containing the particulars set out in Part I of Schedule III and, in the cases mentioned in Part II of that Schedule, setting out the reports specified therein, and the said Part I and II shall have effect subject to the provisions contained in Part III of that Schedule.