Chap 6: Prospectus Flashcards
What is prospectus
Documents offering securities to public.
*securities include Debt and shares both
What is not a prospectus?
Invitation of deposit by banks/NBFC
Purpose of prospectus
When public company offers securities to general public.
(Not required for private placement)
Timing of prospectus
After incorporation (even before certificate of commencement of business)
Expire after certain period of time
Procedures for issuance of prospectus
- BOD decides to issue shares to general public
- Prospectus is prepared including necessary information (directors + expert)
- Apply to commission for approval (21 days before proposed date of publication)
- Publish prospectus in English+Urdu daily newspaper in full or abridged form (within 60 days of approval)
- Make sufficient copies available free at specified places
- Start public subscription (7-30 days after issuance of prospectus)
Approval of commission not required in following cases
Offer to members/employees (of their family members)
Bonus shares
Private placement
Issued by SBP
Issued shares in subsidiary as dividend
Specified places to make prospectus available
Registered office
Website
Stock exchange
Banker
Share registrar
Ballotter
Credit rating agency
(From date of publication to closing of subscription)
Prospectus (registrar)
Filing on or before date of publication
Signed by each director (penalty level 2)
Prospectus (registrar) statement in lieu of prospectus
Public company issues Share through private placement where no prospectus is needed. It need to file statement in lieu of prospectus to registrar
Expert (conditions)
Independent of mgmt, formation and promotion
Written consent
Mentioned in prospectus about consent and not withdrawn
Offence - criminal liability
Incorrect or misleading statement
Omit required information
Offence - who is liable
Every offeror/issuer
Every director or
Any other person who signed it (expert)
When Liable (offence)
There is misstatement in prospectus
A person
.relied on prospectus
.acquired securities
.suffered los
What is liability (offence)
Compensate loss
Liability of secp
Not liable for any misstatement in prospectus approved by it
Certificate of commencement of business who is required?
Every public company having share capital
Certificate of commencement of business is not required for
-Private company
-Company converted from private to public after one year
-Company not having share capital
Restrictions on not having certificate of commencement of business for public company
Start its operations -sale purchase k agreement nahi krskti
Borrowing power
Requirement to obtain Certificate of commencement of business
Cheif executive (or director) and company secretory file declaration to registrar that
1. Shared allotted to minimum subscription
2. Directors paid in full for share taken
3. No money payable to applicants (in public subscription)
File statement in lieu of prospectus (if not public subscription)
