Submitted to Sir Arif

Submitted by Ahmed Ali Shah

Roll no 49941
Department Law Semester 6th
Assignment Topic Prospectus

Prospectus of Company under Company Law.

INTRODUCTION
Definition
“prospectus” means any document described or issued as a prospectus and
includes any document, notice, circular, material, advertisement, offer for sale
document, publication or other invitation offering to the public (or any section of
the public) or inviting offers from the public for the subscription or purchase of
any securities of a company, body corporate or entity, other than deposits invited
by a bank and certificate of investments and certificate of deposits issued by non-
banking finance companies;

Shelf prospectus
A shelf-prospectus is a single offering document allowing companies to make
multiple offerings as disclosed in the offering document within a prescribed time
and subject to prescribed conditions.

Supplement to shelf prospectus

A supplement to the prospectus invites the general public for subscription of the
security(ices) earlier offered to the public through shelf-prospectus. The
supplement to the prospectus for each offering contains updated disclosures.

Purpose of prospectus
If a company wants to issue securities to general public, it has to issue a
prospectus. This prospectus provides the public with relevant information to
decide whether they should invest or not.

Approval of Prospectus
 Prospectus must be approved by SECP prior to its issuance, publishing or
circulation (same applies to shelf prospectus and supplement).
 Issuer or offeror shall submit a copy to SECP for approval at least 21 days
before the proposed date of publication of prospectus.
 It shall be valid for 60 days from the date of approval (this time can be
extended by SECP after recording reasons in writing).

Availability of Prospectus
 The prospectus in its full text or in such abridged form, shall be published
at least in one Urdu and one English daily newspaper. It shall not be
published in the newspapers less than seven days or more than thirty days
before the commencement of the public subscription.
 A sufficient number of copies of the prospectus, as approved by the SECP,
shall be made available, free of charge, from the date of its publication in
the newspapers till the closing of the subscription:
 at the registered office of the issuer,
 with all the securities exchanges of the country,
 with all the bankers to the issue,
 the concerned share registrar,
 the concerned ballotter and
 the concerned credit rating agency, if any.
 The prospectus along with subscription form shall be uploaded on the
website of the issuer and shall remain there from the date of its.

Timing of prospectus
 A company may issue a prospectus at any point of time in its life.
 A company may issue shares to public before commencement of business
 A company may issue shares to public in the future at any time(s).
  Existence of prospectus ends after the purpose is fulfilled (it is not like
memorandum or articles that are permanent documents).

CONTENTS
MAIN CONTENTS
General
The SECP may approve a prospectus if it contains such information and reports as
may be prescribed. Primarily, the prospectus must contain sufficient material to
enable any person to reach a decision on the investment in the securities of the
company.

Some points from 2nd Schedule

Detailed contents of the prospectus have been stated in the second schedule to
the Companies Ordinance 1984, prime of them are as follows:
 Prospectus shall contain the full memorandum of association of the
company with complete particulars of signatories to the memorandum. If
the prospectus is issued after two years of the date of commencement of
business such particulars shall not be required.
 Number and value of shares with existing members and nature of extent of
interest of such shareholders in the company.
 Description of business to be undertaken along with reasonable future
prospects of the business.
 Any provisions in articles of association regarding authority of
determination of remuneration of directors.
 Particulars of directors, proposed directors, secretary and chief executive of
the company and directorships of above persons in any other companies
and any contract regarding appointment of the above persons or
remuneration etc.
 The amount of minimum subscription, it includes
 Purchase price of property to be purchased
 Preliminary expenses including underwriting commissions etc.
  Repayment of any money borrowed for above matters
 Working capital
 Any other expenditure
 If the company intends to meet all or any of the above needs from any
source other than the issue of shares, such source shall be disclosed.
 Date and time of opening and closing of subscription lists. It states the time
and day when applicants can deposit money in bank account of company.
 Amount payable on each share and on each application.
 Full particulars of auditors and legal advisors of the company appointed
under the Ordinance.
 Any personal interest of any director or promoter in the promotion of the
company.
 Voting rights on the shares of the company and any restrictions on it as per
articles of association of the company.
 If the company had already commenced business, then length of time from
the date of commencement of business shall also be mentioned in the
prospectus.
 Purpose or the activity for which the proceeds of the issue of shares shall
be used.
 Details if the shares are to be issued for a consideration otherwise than in
cash.
 Summery in columnar form of the earnings of the company for each of the
last three financial years.
 Pending litigations of the company or its subsidiaries other than the routine
litigations.

REPORTS TO BE SET OUT IN PROSPECTUS

General
In addition to the above contents, following reports, by the auditors of the
company shall also be set out in the prospectus; namely
  A report on assets and liabilities at the last date when accounts were
prepared and profit and loss account of the company along with any
unusual or extraordinary or non-recurring item.
 Dividends paid by the company during last five financial years for all classes
of shares including when dividend was not paid and also on the matter
when accounts of the company were not prepared for any year during last
five years.
 If the company has got subsidiaries the auditor’s report shall deal with the
profit and loss accounts and statements of assets and liabilities of the
subsidiaries as well along with the same financial statements of the
company itself.

Acquisition of business
If the proceeds of the issue shall be used for the acquisition of any business or any
interest therein then the auditors (of that company whose shares or interest is
proposed to be purchased) shall report separately on last five year’s profits and
losses of that business or company and assets and liabilities of that business or
company at a date not earlier than 120 days of the prospectus.

Acquisition of subsidiary
Further If the proceeds of the issue shall be used for the acquisition of any
business or any interest therein, which shall make the other company as
subsidiary of the company, then the auditors (of that company whose shares or
interest is proposed to be purchased) shall report separately on last five year’s
profits and losses of that business or company and assets and liabilities of that
business.
The report shall also explain that what difference would it have been on the profit
and loss of the company (issuing a prospectus) had the company always held
those shares in that company which are proposed to be purchased now.
Further if that other business or company has subsidiaries, the report shall
include the performance and assets and liabilities of that business as well.
Criminal liability for defective prospectus
A person commits an offence, who:
(a) Makes a misleading, incorrect, untrue or deceptive statement in a prospectus;
or
(b) Omits information or a statement from a prospectus that Securities Act, 2015
or any rule or regulation made under Securities Act, 2015, requires to be included
in the prospectus.

COMPENSATION FOR FALSE OR MISLEADING PROSPECTUS

Who is liable?
Every offeror, issuer, director of an offeror or issuer or any person who has signed
the prospectus shall be liable to pay compensation.

To whom?
to any person who acquires any of the securities, in reliance upon the prospectus,
to which the prospectus relates and suffers loss in respect of them as a result of
any incorrect, untrue or misleading statement in the prospectus or the omission
from it of any matter required to be included under Securities Act, 2015.

Conclusion
The prospectus is a very important document. Its main object is to invite the
general public for the purchase of shares or debenture. However, director,
promoter, person authorizing the issue of prospectus may escape from liability by
proving the defenses made available under the Ordinance.