A formal legal document, which is required by and filed
with the Securities and Exchange Commission, that
provides details about an investment offering for sale
to the public. A prospectus should contain the facts
that an investor needs to make an informed
Also known as an "offer document."
A formal offer document
It is required by and filed with the Securities and
Exchange Commission(SEC India)
Provides details about an investment
Offering for sale to the public
It contain the facts that an investor needs to make an
informed investment decision.
When a company go to issue share or debenture on
Before company issue a documents to public which
contain all the details about the particular share or
debt and company
Also a way to identify the profitability and growthness
It helps the public to take the decisions about the
purchase of these share or debt on the basis of it
Time period normally 1 week only
After the receipt of certificate of incorporation, if the
promoters of a public limited company wishes to issue
shares to the public, he will issue a document called
It is an invitation to the public to subscribe to the share
capital of the company
Prospectus is issued with the following broad objectives:
It informs the company about the formation of a new
It serves as a written evidence about the terms and
conditions of issue of shares or debentures of a company.
It induces the investors to invest in the shares and
debentures of the company.
It describes the nature, extent and future prospectus of the
It maintains all authentic records on the issue and make
the directors liable for the misstatement in the prospectus.
The following important matter are included in the
The name, addresses and occupation of directors and
The number and classes of shares and debentures issued.
The qualification share of directors and the interest of
directors for the promotion of company.
The prospectus contains the main objectives of the
company, the name and addresses of the signatories of the
memorandum of association and the number of shares
held by them.
The name and addresses of the vendors of any
property acquired by the company and the amount
paid or to be paid.
particulars about the directors, secretaries and the
treasures and their remuneration.
The amount for the minimum subscription.
If the company carrying on business, the length of
time of such businesses.
The estimated amount of preliminary expenses.
Name and address of the auditors, bankers and
solicitors of the company.
Time and place where copies of balance sheets, profits
and loss account and the auditors report may be
The auditor’s report so submitted must deal with the
profit and loss of the company for each year of five
financial years immediately preceding the issue of
If any profit or reserve has been capitalized, the
particulars of such capitalization will be stated in the
Legal requirements of prospectus
A prospectus Is required to be issued only after the
incorporation of company
The prospectus must contain all the particulars, listed
in the schedule II of companies act
The prospectus must be dated
Before a prospectus is issued, a copy of it must be
registered with the registration of companies
Prospectus shall be issued within ninety days of its
STAEMENT IN LIEU OF A
A statement in lieu of prospectus. According to the companies'
ordinance if a public company is not issuing a prospectus on its
formation, it then must file a statement in lieu of prospectus
with the registrar of the companies. A statement n lieu of
prospectus is defined as:
"A public document prepared in the second schedule of
company's ordinance by every such public company which
doesn't issue a prospectus on its formation with the registrar
before allotment or shares of debentures, and signed y every
person who is named therein.“
A statement in lieu of prospectus gives practically the same
information as a prospectus and is signed by all the directors or
proposed directors. In case, the company has not filed a
statement in lieu of prospectus with the registrar, it is then not
allowed to allot any of its shares or debentures.
A statement in lieu of the
prospectus contains the
information as described below
1- Name of the company
2- Statement of capital
3- Description of the business
4- Names, addresses, and occupation of directors
5- Estimated initial expenses
6- Names of vendors and details of property
7- Material contracts
8- Director's interest
9- Minimum subscription
TYPES OF PROSPECTUS
RED HEARING PROSPECTUS
a prospectus that contains most of the information
that will be presented in the final prospectus but often
does not mention a price and/or the number of
securities. A red-herring prospectus is alternatively
known as a preliminary prospectus.
It can be distributed to potential investors
after the registration statement for a securities offering
has been filed with the securities commission.
The public limited companies, which are yet to obtain
the certificate of commencement of business, without
filing of business, require the SLP (Statement in lieu of
It must be filed when a Private company becomes a
a shorter version of the prospectus that includes all the
most key elements of the typical prospectus. An
abridged prospectus contains information very similar
to the typical prospectus but in a concise and compact
Both versions of the prospectus must comply with the
disclosure requirements prescribed by the relevant
a prospectus that is deemed to have been made by the
issuer, though it is actually offered to the public by a
third party or the so-called issue house (Indian
terminology). The issuer saves the underwriting
expenses in selling its securities.
a prospectus that describes a set of unissued, but
registered securities. It is used in situations where
securities are issued in consecutive stages over a
period of time because the size of issue is too large
(and funds to be raised are enormous, making the
filing of prospectus each time very expensive). Later
on, an issuer will only need to file the so-
called information memorandum with the relevant
a prospectus that is issued without disclosure of the
number of securities being offered or, in an initial
public offering, the estimated or indicative price range.
It is a preliminary prospectus that precedes the filing
of a red-herring prospectus.