After the company have been registered, it promoters take upon themselves the task of making the existence of the company known, as widely as possible and inviting the public to subscribe to its share so that the company may have sufficient capital to commence its business. This is done by preparation and issuing of another document known as prospectus. Only a public limited company issues the prospectus.
A prospectus cannot be issued to public limited company unless a copy of its has been filed with registrars and every prospectus must state that a copy of prospectus have been filed with the registrar. A public limited company may not issue a prospectus to public when the capital raised from the original members is sufficient for the purpose. But it then must file the statement in the lieu of prospectus.
OBJECT OF PROSPECTUS
1. To inform the public about the newly formed company.
2. To create firm believes and confidence in the minds of the prospective investors and to induce them to invest their saving to the company.
3. To assure investor that the information, terms and condition specified in the prospectus are reliable and backed by relevant documents which are kept in the company ordinance.
4. To express the director’s liabilities for information served in the prospectus.
5. To describe prospectus of company and advantages that one can gain by becoming the share holder.
CONTENTS OF PROSPECTUS
Generally the prospectus contained the following:
1. Name and object of company
2. Name, address and occupation of the signatories to the memorandum of association and article of association along with the number of shares purchased by them.
3. Directors qualification shares and remuneration of directors for their service.
4. The name , addresses, occupation of directors, managing directors and other officers together with their description. 5. The name and address of the auditors.
6. The name and address of the bankers where accounts of the company has been kept.
7. The minimum subscription on which the director may proceed to allot share to general public.
8. Share capital, with number of share , their face values
9. The name and address and occupation of vendors of any property purchased by the company and the amount paid or payable in cash shares or debentures.
10. The amount estimated or preliminary expense and person by whom any of these expense have been paid or payable.
11. The voting rights and meeting of the company.
12. The number of founder or promoters of company and the extent of their interest in profit and property of the company.
13. Particulars of any contracts entered into the prospectus.
14. Any provision for payment of brokerage and commission to brokers and commission agents.
15. Full particulars of interest if any of directors or promoters and whether any amount is payable to the directors for their services or not.
16. Names of under writers if any opinion of directors that are resource of underwriter are sufficient to discharge there obligation.
17. A declaration that a copy of prospectus has been filed with the registrar, before the issue of prospectus