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Q. No. 12: What is Prospectus? What matters should be embodied in a prospectus issued by the company? OR what is a prospectus of joint stock companies? Describe its Contents. ANSWER:
PROSPECTUS
INTRODUCTION: After having been registered with the registrar, a company gets a certificate of incorporation in case being a private limited company, a private limited company, it can commence business, but a public limited company cant commence business has not been issued to company. To obtain this certificate a public limited has to issue a prospectus signed by the directors? DEFINITION: According to the Companies Ordinance 1984, Prospectus has been defined as: Any document described or issued as prospectus, and includes circular, advertisement or other communication, inviting offers from public for the purpose of allotting the company shares in, or debentures of, a body corporate, or inviting deposits from invited by a banking company, or a financial institution approved by the government, whether described as prospectus or otherwise. NEED FOR THE PROSPECTUS: The need of a prospectus can be explain by the following headings: 1) Setting Up a New Company: A prospectus is needed to bring into the notice of the general public, about the creation of company. 2) Induce Prospective Investors: Prospectus is issued to convince the prospective investors about the genuineness and financial base of the company. 3) Acceptance From Directors: It is also issued to assure that the company directors accept responsibility of the statement in the prospectus. 4) Record terms and Conditions: A prospectus is used to keep an authentic record of terms and conditions on which the company capital has been raised. CONTENTS OF PROSPECTUS: The important matters to the included in prospectus are divided in number of parts with the heads. These are briefly discussed below: (1) Share Capital: Under this head, information is provided regarding: (i) Share capital of the company. a) Authorized b) Issued, Subscribed or paid up capital c) Present issues offered for subscription (ii) Basis of allotment of shares. (iii) Facilities available to non resident Pakistanis for purchase of shares etc. (2) Commission, Brokerage and Tax exemptions: 1) Commission to be paid to the bankers to the issue. 2) Brokerage 3) Tax exemption on investment on the shares of the company. Prepared By: H.ABDUL REHMAN 0321-6485593
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(10) Application and Allotment: The procedure of applying for shares, their scrutiny and allotment of share is made clear to the perspective investors in this section. MISSTATEMENT IN THE PROSPECTUS: The prospectus must give a full, accurate and a fair picture of the state of affairs and prospects of the company. On the other hand, it shall be deemed to be a prospectus containing untrue statement. Prepared By: H.ABDUL REHMAN 0321-6485593
CONCLUSION: The public company has to issue a prospectus in order to issue its shares to the public whereas if the directors thing that the existing shareholder will purchase the new issue of shares then it will issue statement in lieu of prospectus.
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