The prospectus is the very foundation of a company’s edifice. It is the document which is to contain all material facts concerning a company and its operation so that a prospective investor may make an informed decision as to the merit of an investment. It is usually issued immediately after the incorporation of the company before the company commences its business. Prospectus is, in fact, an invitation to public to subscribe to share capital of company.
Section 2 (29) 52, 53, 54, 56, 57, 59, 60, 69, of companies ordinance 1984.
Purpose of Issuing of Prospectus
Following are the purpose of issuing of prospectus
Prospectus is issued to inform public about formation of new company.
2. Responsibility of Directors
Another purpose of issuing of prospectus is to safe that responsibility of directors of company, which is about statements in prospectus.
Prospectus is issued to have record about those conditions on which capital is raised.
Contents of Prospectus
Following are the contents of Prospectus
- Name, addresses and occupation of promoters of company are content of prospectus.
- Election, name, addresses, occupation, powers, borrowing powers, interest of directors in dividends and other benefits, and remuneration of directors are contents of prospectus.
- Appointment of chief executive and his remuneration are contents of prospectus.
- Name of auditors, auditor’s report, and auditor’s certificate on share capital.
- Plant, place of plant, project and machinery of company.
- History of the company.
- Place of registered office of company.
- Tax exemption on investment on shares of company, exemption from custom duty, and sales tax on plant and machinery.
- Share capital of company, authorized capital, paid up capital and issued capital.
- Details of proceedings, which are pending in court, and legal advisor.
- Bankers of company and commission, which is paid to bankers.
Reports to be set out in Prospectus
The prospectus must set out the following reports.
- An auditors report showing (i) profit or losses in each of the last five years, (ii) rate of dividend during the last five years, (iii) assets and liabilities at the date of the last accounts (iv) similar details with regard to subsidiary companies, if any
- When the proceeds of the issue are to be used to buy a business, a report by named accountants in its profits and losses for the last 5 years and its assets and liabilities at the date of last account.
- Where the proceeds of the issue are to be used to buy shares in a subsidiary a similar report as in (b).
- A statement that a copy of the prospectus has been filed with the registrar, together (i) the consent of the expert to file the prospectus, (ii) a copy of every contract or memorandum giving full particulars of contract not reduced to writing, (iii) a copy of every contract appointing or fixing the remuneration of a managing director or manager.
- A statement that the consent of the Federal Government has been obtained as required under the control of capital issue (Continuance of Control) Act 1947.
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.