Professional Documents
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Elements of Company Law
Elements of Company Law
(b) limits the number of members to fifty not including: (i) person
ho are in the employment of the company, and (ii) person who,
having been formerly in the employment and have continued to
be members after the employment ceased:
• Proper Authority:
• Invitation to public
• Information memorandum
Information memorandum means a process under
taking prior to the filing of a prospectus by which a
demand for the securities proposed to be issued by a
company is elicited, and the price and the terms of
issue for such securities is assessed, by means of a
notice, circular, advertisement or document.
• Red herring prospectus:
Is a prospectus which does not have details of either
price or number of share being offered or the amount of
issue. This means that in case price is not disclosed, the
number of share and the upper and lower price bands
are disclosed. On the other hand an issuer can state the
issue size and the number of shares are determined
later. An RHP and Draft Offer Document can be filed with
the ROC Without the Price Band and the issuer, in such a
case will notify the floor price or a price band by way of
an advertisement one day prior to an opening of an
issue.
• Abridged Prospectus:
The Companies Act 1956 defines ‘abridge prospectus’ to
mean a memorandum containing such salient features
of a prospectus as may be prescribed. It contains all the
salient features of a prospectus. It accompanies the
application form the public.
• Offer document
Offer document means prospectus in case of public issue
or offer for sale and letter of offer in case of right issue,
which (offer document) is filed with the registrar of
companies (ROC) and Stock Exchange. An offer
document covers all the relevant information to help an
investor to make his/her investment decisions.
• The Golden Rule as to framing of prospectus:
The Golden Rule as to framing of prospectus was laid
down by V.C. Kindersley in New Brunswick & Canada
Rly. & Land co. v.Muggeridge,(1860) 1 and Sm. 363 in
the following words:
those who issue prospectus holding out to the public
the great advantages which will accrue to persons who
will take a share in a proposed undertaking, and
inviting them to take share on the faith of the
representations therein contained, are bound to state
every thing strict and scrupulous accuracy and not only
to abstain from stating as fact that which is not so but
to omit no one fact within their knowledge,
existence of which might in any degree affect the nature
or extent and quality of the privileges and advantages
which the prospectus holds as inducement to take
share.”
DOCTRINE OF ULTRA VIRES