Chapter 6 (Prospectus)

Question 1

What is a prospectus?

Answer 1

A document inviting the general public to subscribe for shares or debentures.

Question 2

What is a shelf-prospectus?

Answer 2

A prospectus used to make multiple offerings within a prescribed time.

Question 3

What is a supplement to a prospectus?

Answer 3

A document providing updated disclosures on subsequent issues when a shelf-prospectus is issued.

Question 4

Who approves the prospectus?

Answer 4

The Commission approves the prospectus at least 21 days before the proposed date of publication.

Question 5

What is the validity period of prospectus approval?

Answer 5

1. 60 days from the date of approval (extendable by the Commission).
2. A longer period may be approved for shelf-registration.

Question 6

In what cases is approval of a prospectus not required?

Answer 6

1. Private placement.
2. Offers made to members or their family members.
3. Offers made to employees or their family members.
4. Bonus issues.
5. Dividends issued as shares.
6. Offers by the State Bank of Pakistan.

Question 7

Where must a prospectus be published?

Answer 7

In one English and one Urdu daily newspaper.

Question 8

Where must a prospectus be uploaded?

Answer 8

On the company’s website from the date of publication until the closing of subscriptions.

Question 9

Where must a prospectus be made available?

Answer 9

1. At the registered office of the company.
2. At stock exchanges in Pakistan.
3. With all bankers to the issue.
4. With the concerned share registrar.
5. With the concerned ballotter.
6. With the concerned credit rating agency.

Question 10

When does public subscription commence?

Answer 10

Subscription must start after 7 days but within 30 days of the issuance of the prospectus.

Question 11

What are the conditions for including an expert statement in the prospectus?

Answer 11

1. The expert must be independent of the company.
2. The expert must give written consent.
3. The prospectus must state that the expert gave consent and did not withdraw it.

Question 12

What constitutes an offence or criminal liability in relation to a prospectus?

Answer 12

Errors or omissions in the prospectus.

Question 13

Who can claim compensation for a misstatement in a prospectus?

Answer 13

A person who relied on the prospectus, acquired securities, and suffered a loss.

Question 14

Who is liable for misstatements in a prospectus?

Answer 14

1. Every offeror or issuer.
2. Every director of the company.
3. Any other person who signed the prospectus.
4. The Commission is not liable for any loss.

Question 15

Which companies are required to obtain a certificate of commencement of business?

Answer 15

Every public company having share capital.

Question 16

What are the requirements to obtain a certificate of commencement of business?

Answer 16

1. Shares allotted to meet the minimum subscription.
2. Directors paid for the shares they subscribed to.
3. No money is payable to applicants if public subscriptions are made.
4. If public subscriptions are not made, a statement in lieu of a prospectus must be filed.
5. A declaration must be filed by the Company Secretary and Chief Executive (or a Director).

Question 17

What is the legal status of contracts before obtaining a certificate of commencement of business?

Answer 17

1. Borrowing agreements are void.
2. Other agreements are provisional.