COMPANY LAW II : Topic 3: FINANCING A o Refusal of registration : s 233(1) CMSA

COMPANY
o Prospectus exposure : CMSA allows the SC
o To run its business, a company needs fund /
to publish a draft prospectus which has not
capital. 

been registered but which the public can
o Most common: To issue SECURITIES to
comment upon.

public.

o What is securities?
. s 232(4) CMSA.

o Registrable prospectus : s 232 (6) CMSA.

. s 2 CMSA : “securities”

o S. 235(1)(b)(iii) : consequences of

INTRODUCTION registration

o Prior to the issuance of such securities to CONTENTS OF PROSPECTUS

the public the company need to issue a

o Regulatory body that empowered under the
document known as prospectus.

CMSA to assist the prospective investor in

o A prospectus is a document which contains making their informed decision on his

all material information of a company’s investment is the Securities Commission (SC)

operation to help its future investors in making

o Function of SC is to ensure that the
their informed decision whether or not to
contents of the prospectus contain all the
invest in the company.

necessary information and disclose important

o In other words, it is an invitation to public to material with due diligence.

subscribe to share capital of the company.

CONSEQUENCES OF BREACH OF S 235

DEFINITION
AND S 236 CMSA

. s 226 & 242(1) CMSA

o Failure to comply with s 235 and 236 CMSA
may result in:

REGISTRATION REQUIREMENT
(a) s 233(1) CMSA

(b) s 245(1) CMSA.

o Mandatory registration requirement :

. s 232(1) & (2) CMSA

(c) Issuer and any other persons responsible
o Contravention?
 for causing the prospectus to contravene s
. s 232(7) CMSA

o Civil Action
235 and 236 CMSA incurring criminal and civil
. S 357 & 358 CMSA
liabilities out of a statement or information that
is false or misleading in a prospectus.

o 3 Exemptions from registration: Excluded

offer or excluded invitation: Schedule 6, o Consequences of issuing a stop order :

CMSA; or Excluded issue: Schedule 7, (i) s 245(7), (8), (9) CMSA

CMSA; or

Minister of Finance makes a prescription

DEFENCES TO LIABILITY

o Persons liable under s 246 and s 248 CMSA

for defective prospectuses that contain false
or misleading statements, or in which material
omission occurs, may avoid liability if they can
establish one or more of the defences set out
in :

. s 250, 251, 252, 253 and 254 CMSA.

o Persons liable under s 249 CMSA for

misleading or defective acts, may avoid
liability if they can establish the defence set
out in s 252 CMSA.


Duty of disclosure