Prospectus

Conceptual Framework

1. Project description
2. Project – Himalaya Hydro
3. Capacity – 600 MW
4. Project Cost – 6 Arab

For Above project a company needs Capital and what are the sources of capital for company????

1. Sources of Fund
2. Equity
3. Loan
4. Debt Instrument

Equity

It refers to investment in the form of share capital. The sources of equity are promoters and general
public. Institutional investors like Nepal citizen investment trust, Pension Fund etc also play
important source. International financial institutions (IFIs) ADB, IFC also play major role

Loan and Debt Instrument

Loan

Mainly Bank and Financial Institutions are potential investor in this kinds of capital for company.
Basically banks includes

1. Local Banks and Financial Institutions

2. International banks and Financial Institutions

Debt

1. Debenture
2. Bond

Capital Market

Capital Market relates to rising of capital from general public. It can be raised in the form of equity
(Like Initial Public Offering) Debt (Like Bonds) and participation in collective investment schemes
(like unit trust, Mutual fund)

Raising Equity

Only Public Company is permitted to raise capital from public. Therefore, decision whether to
incorporate as a public limited company or a private limited company should also be based on the
need to have access to capital market. The formalities are prescribed in the securities Act 2063,
Company Act 2063 and other securities related rules/directives
Question for Discussion

Kabir bank limited, a national level commercial bank is preparing to make initial public issue ( IPO)
of the its shares

1. As general investor, what information would you like to know before makings
investment decision?
2. How can you get required information for the purpose of investment decision?

So far as Public Company is concern

All the shares to be issued by public company have to be registered with securities Exchange Board
of Nepal (SEBO)

If the share have to be offered to more than 50 people, the share should be offered by way of public
offering ( therefore limitation on private placement. Prospectus has to be published for the purpose of
offering the shares to public

Prospectus???

Prospectus means the prospectus issued by the corporate body before issuing securities to public
pursuant to section 30 (Section 2(p) of the Securities Act 2063)

Generally, Prospectus is an invitation to offer or advertisement made to the public to subscribe its
share or debenture. However, while issuing right share, it act as an offer from the company

SEBO will only approve prospectus which provides sufficient information with which prospective
investors can evaluate assets and liability, financial status, profit and loss, expected future happening
of the company

Normally, prospectus contains information about management, business objective, financial health,
future projects, business prospects, information about underwriters, information about litigation etc.

The information provided in the prospectus in very important from the investor point of vies as their
investment decision is based on the information provided in the prospectus

The officers in the company who has sign the prospectus are liable for any misrepresentation contain
in the prospectus

Content of Prospectus

The Company Act of Nepal 2053 had provided detail contents to be included in the prospectus of the
company. However, the company act 2063 doesn’t make such provision

The securities Act 2063 doesn’t detail out the contents of the prospectus. The securities rules have
specified the contents of the prospectus. (sec 32). For detail information Please visit the website of
SEBO.
The Securities Rule provided that the prospectus should contain the following information of the
company

Capital

Objectives and main business

Matters relating to litigation

Financial position

General management

Expert preparing the prospectus etc

Organization and Companies that are exempted from publishing Prospectus

1. Securities issued by NRB

2. Securities issued under the full guarantee of Government of Nepal
3. Securities proposed to sell not to more than 50 persons
4. Securities issued to employees or workers
5. Securities approved by the Board without a need to publish prospectus.

Liability under Prospectus

The company director signing the prospectus, issue managers, preparing the prospectus are jointly
and severally accountable towards the detail provided in the prospectus

Any person who has invested relying on the details published in the prospectus and if such person
suffers loss due to malafide or intentional Misrepresentation, company director or specialist preparing
the prospectus are liable to damage

1. Personally liable for the damage suffered

2. Subject to a fine up to Rs. 50,000.00 or imprisonment up to two years or both. (Company Act
2063)