PROSPECTUS OF A

COMPANY

Farzana Yeasmin Mehanaz

Faculty of Law
Eastern University
What is the Prospectus of a Company?
■ “A prospectus means any documents described or issued
as a prospectus and includes any notices, circular,
advertisement, or other documents inviting deposit from
the public or documents inviting offer from the public for
the subscription of shares or debentures in a company.”
■ A prospectus also includes shelf prospectus and red
herring prospectus. A prospectus is not merely an
advertisement. 
What is the Prospectus of a Company?
■ A prospectus is a formal legal document issued
by companies that are offering securities for sale.
■ Required and filed with Registrar for registration (S.138).
■ provides details about an investment offering for sale to the
public.
■ should contain the facts that an investor needs to make an
informed investment decision.
 prospectus is also known as “OFFER DOCUMENT”.
Objectives of Prospectus
 It informs the stakeholders about the formation of a new
company.
 It serves as a written evidence about the terms and conditions
of issue of shares or debentures of a company.
 It induces the investors to invest in the shares and debentures of
the company.
 It describes the nature, extent and future prospects of the
company.
Requirements to Issue Prospectus
■ Every public listed company who intends to offer
shares or debentures of the company to the public.
■ Every private company who ceases to be a private
company and converts into a public company and
intends to offer shares or debentures of the
company to the public.
Debentures
Debentures
Share vs. Debentures
Legal Requirements of Prospectus
 A Prospectus is required to be issued only after the
incorporation of company.
 The prospectus must contain all the particulars, listed in the
Companies Act.
 The prospectus must be dated.
 Before a prospectus is issued, a copy of it must be registered
with the registration of companies.
 Prospectus shall be issued within ninety days of its registration .
Contents of Prospectus
The following important matter are included in the
prospectus:
■ The name, addresses and occupation of directors and managing directors.
■ The number and classes of shares and debentures issued.
■ The qualification share of directors and the interest of directors for the
promotion of company.
■ The prospectus contains the main objectives of the company, the name
and addresses of the signatories of the memorandum of association and
the number of shares held by them.
Qualification share
 Share qualification of a Director:
 It means the shares to be taken by a Director to qualify him as a
Director of the company.
 It shall be the duty of every Director to hold a specified share
qualification within 2 months after his appointment as Director.
 A failure to acquire the specified share qualification will result
in the vacation of the office of the Director.
Cont…
■ Particulars about the directors, secretaries and the
treasurers and their remuneration.
■ The amount for the minimum subscription.
■ If the company carrying on business, the length of time
of such business.
■ The estimated amount of preliminary expenses.
■ Name and address of the auditors, bankers and solicitors
of the company.
Cont…
■ Time and place where copies of balance sheets, profits and
loss account and the auditors report may be inspected.
■ The auditor’s report so submitted must deal with the profit
and loss of the company for each year of five financial years
immediately preceding the issue of prospectus.
■ If any profit or reserve has been capitalized, the particulars
of such capitalization will be stated in the prospectus.
Formalities in Issuing Company Prospectus

Every prospectus issued by or on behalf of a

company must be dated and that date shall unless
the contrary is proved, be regarded as the date of its
publication (section 55).
A copy of the prospectus signed by every director
or proposed director or by his agent must be
delivered to the registrar on or before the date of
publication
Cont…
A prospectus must not be issued more than 90
days after the date on which a copy there of is
delivered for registration.
If a prospectus is so issued it will be deemed to be
a prospectus a copy of which has not been
delivered to the registrar.
Statement in lieu of a Prospectus
 A public company is to issue a prospectus for inviting general public to
subscribe to the capital of the company.
 But if the promoters are confident that they are able to raise sufficient
capital to run the business they don’t require issuing a prospectus rather
to issue statement in lieu of prospectus.
 Is required to deliver to Registrar a “statement in lieu of prospectus” for
registration, at least three days before the allotment of shares or
debentures.
 Such a statement is required to be signed by every person, who is named
therein as a director or a proposed director, of the company, or by his
agent authorized in writing.
Criminal Liability for Untrue Statement in the Prospectus

 U/S. 146:
 If a prospectus is issued & Contained untrue statement, every person who is
authorized the issue of prospectus shall punishable with imprisonment up to 2 years,
or with fine up to 5000 take or with both.
 Person shall not be liable if he can prove that-
I. The statement was immaterial;
II. He had reasonable ground to believe that the statement was true.
 An Expert, an auditor, legal advisor, attorney, solicitor, banker or broker shall not be
deemed to have authorized the issue of a prospectus merely by giving consent.
Therefore, they shall not be liable for mis-statement unless their statement is
incorrect - S.146 (2).
Cont…
U/S.147:
Penalty for fraudulently inducing persons to invest
money.
Any person who either knowingly or recklessly induces
any other person fraudulently to invest money, he shall
be punishable with imprisonment up to 5 years/with fine
up to 15000 thousand taka or with both.