Topic: PROSPECTUS OF THE COMPANY

INTRODUCTION:
Prospectus of company
A company's prospectus is a formal legal document designed to provide information and full details about
an investment offering for sale to the public. Companies are required to file the documents with the
Securities and Exchange Commission (SEC). The prospectus documents must be made available to a
prospective public investor prior to purchase. Investors are encouraged to read and understand the terms
of the offering before making a purchase decision.
•A prospectus is a formal document that is required by and filed with the SEC that provides details about
an investment offering for sale to the public.
•This document is used to help potential investors make a more informed decision on whether or not to
invest.
•EDGAR is a public online tool that allows individuals and analysts to search for and retrieve corporate
prospectus filings.
•Investors may also seek to obtain a prospectus through their broker or by contacting a company's investor
relations department.
CONTENT OF PROSPECTUS :
• Company prospectus documents have become increasingly accessible with the advent
of the internet. Most companies have a corporate website with a section labeled
Investor Relations that should have available a wide range of company documentation,
including quarterly and annual reports. Many investment websites may also offer links
directly to a company's or fund's prospectus documents.

• The prospectus document is issued to inform investors of the potential risks involved
with investing in a particular stock or mutual fund. The information provided in the
prospectus also serves as a form of protection for the issuing company against any
claims that information was not fully disclosed or detailed prior to the investor putting
money into an investment.

• Companies that wish to offer stock or bond for sale to the public must file a prospectus
as part of the registration process with the SEC. Companies must file a preliminary and
final prospectus. However, the SEC has specific guidelines as to what's listed in a
prospectus for various securities.
PRELIMNARY PROSPECTUS:

• The preliminary prospectus;

• (sometimes known as a red herring) is the first offering document provided by
a security issuer and includes most of the details of the business and
transaction. However, the preliminary prospectus doesn't contain the number
of shares to be issued or price information. Typically, the preliminary
prospectus is used to gauge interest in the market for the security being
proposed.

• The final prospectus contains the complete details of the investment offering
to the public. The final prospectus contains any finalized background
information as well as the number of shares or certificates to be issued and
the offering price.
• .
 PROSPECTUS ADDITTIONAL COMPRISING

• A following information at a minimum prospectus will include the ;

• A brief summary of the company’s background and financial information

• The name of the company issuing the stock
• The number of shares
• Type of securities being offered
• Whether an offering is public or private
• Names of the company’s principals
• Names of the banks or financial companies performing the underwriting
• Some companies are allowed to file an abridged prospectus, which is a
prospectus but contains some of the same information as the final
prospectus
 SORTS OF PROSPECTUS
• Types of prospectus
• According to Companies Act 2013, there are four types of prospectus.

• Deemed Prospectus – Deemed prospectus has mentioned under Companies Act, 2013 Section 25 (1). When a company
allows or agrees to allot any securities of the company, the document is considered as a deemed prospectus via which the
offer is made to investors. Any document which offers the sale of securities to the public is deemed to be a prospectus by
implication of law.

• Red Herring Prospectus – Red herring prospectus does not contain all information about the prices of securities offered and
the number of securities to be issued. According to the act, the firm should issue this prospectus to the registrar at least
three before the opening of the offer and subscription list.

• Shelf prospectus – Shelf prospectus is stated under section 31 of the Companies Act, 2013. Shelf prospectus is issued when a
company or any public financial institution offers one or more securities to the public. A company shall provide a validity
period of the prospectus, which should not be more than one year. The validity period starts with the commencement of the
first offer. There is no need for a prospectus on further offers. The organization must provide an information memorandum
when filing the shelf prospectus.

• Abridged Prospectus – Abridged prospectus is a memorandum, containing all salient features of the prospectus as specified
by SEBI. This type of prospectus includes all the information in brief, which gives a summary to the investor to make further
decisions. A company cannot issue an application form for the purchase of securities unless an abridged prospectus
accompanies such a form
 Importance of prospectus:
• The company provides prospectus with capital raising intention. Prospectus
helps the investors to make a well-informed decision because of the
prospectus all the required information of the securities which are offered to
the public for sale.

• Whenever the company issues the prospectus, the company must file it with
the regulator. The prospectus includes the details of the company’s business,
financial statements.

• • To notify the public of the issue

• • To put the company on record with regards to the terms of the issue and
allotment process
• • To establish accountability on the part of the directors and promoters of
the company
 Example of prospectus
• Prospectus Example
• In an IPO, the prospectus tells potential shareholders about
the company’s plans and business model.

• For insurance and investment fund customers, a prospectus

lists out the objective of the product, inclusions, and
exclusions, fees, etc.

• For an ETF, a prospectus informs likely investors of the fund’s

goals, history, portfolio, fees and costs, and other financial
details.
 REQUIREMNTS OF PROSPECTUS
• The prospectus contents are specified in the Companies Act. The prospectus must touch over the following content
points:

• 1. Details of the company, such as name, registered office address, and objects

• 2. Details of signatories to the Memorandum and their shareholding particulars

• 3. Details of the directors

• 4. Details of shares offered and the class of the issue as well as voting rights

• 5. Minimum subscription amounT

• t
• 6. The amount payable on application, on allotment, and on further calls

• 7. Underwriters of the issue

• 8. Auditors of the company

• 9. Audited reports regarded profit and losses of the company

 Preliminary Prospectus vs. Final Prospectus

• The preliminary prospectus is used by the issuing company or fund house

to get a preliminary idea about the demand for the security proposed. It
provides you with detailed information on business and transactions.
However, the financial instrument's price, number of shares, and other
finalised background information are not provided.

• The final prospectus, on the other hand, offers all types of information
that the public needs at the time of investing in it. You’ll also find finalised
background information, offer price, and the number of certificates or
stocks. You can make a sound investment decision after going through this
final prospectus.
 How does a Prospectus Help an Investor?

• A prospectus provides all the information an investor needs to

make an informed investment. A company or fund house has
to file the prospectus with the US Securities and Exchange
Commission for approval. Once approved, this formal
document helps investors understand the offered security,
mutual fund, or bond risks. All the risks associated with the
investment are usually listed at the beginning of the
prospectus.

• As an investor, you should always check information in the

prospectus and study a company's financials before investing.
You should only invest in financially viable schemes. This is
because you must be very sure that the company is financially
capable of honouring its commitments
Mutual funds usually mention information

• You’ll find the following information in a prospectus for

the mutual fund:
• Objectives of the fund
• Risks
• Strategies of investment
• Performance
• Fund management details
• Expenses
• Policy of distribution
• Fees
ISSUANCE OF PROSPECTUS