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PROSPECTUS
In simple words, it may be defined as an invitation to the public to subscribe to a
companys shares or debentures.
Prospectus is a document that invites the public to subscribe to the share capital or
debentures of a company. If it does not do that, it cannot be called a prospectus.
According to the Companies (Amendment) Act, 1971, an invitation to the public
inviting deposits is also deemed to be a prospectus. Some companies do not
directly to the public themselves, but allot the entire share capital to an
intermediary, which then offers the shares to the public by an advertisement of its
own. Any document by which such offer for sale to public is made is deemed to be
a prospectus.
After getting the company incorporated, promoters will raise finances. The public
is invited to purchase shares and debentures of the company through an
advertisement. A document containing detailed information about the company
and an invitation to the public subscribing to the share capital and debentures is
issued. This document is called prospectuses. Private companies cannot issue a
prospectus because they are strictly prohibited from inviting the public to subscribe
to their shares. Only public companies can issue a prospectus.

DEFINITION ACCORDING TO
COMPANIES ORDINANCE 1984
Section 2 (36) of the Companies Act defines prospectus as, A prospectus means
any document described or issued as prospectus and includes any notice, circular,
advertisement or other documents invent deposits from public or inviting offers
from the public for the subscription or purchase of any shares in or debentures of a
body corporate.
Contents of prospectus

The main contents of a prospectus are:
1. Main object of the company with the names, addresses, description and
occupation of signatories to the memorandum and the number of shares subscribed
for by them.

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2. Number and classes of shares and the nature and extent of the interest of
holders thereof in the property and profits of the company.
3. The number of redeemable preference shares intended to be issued and the
date of redemption or where no date is fixed; the period of notice required for
redeeming the share s and proposed method of redemption.
4. The number of shares. If any, fixed by the Article as the qualification of a
director and the remuneration of the directors for the service.
5. The names, occupation and addresses of directors, managing director and
manager together with any provision in the Articles or a contract regarding their
appointment remuneration or compensation for loss of office.
6. The time of opening of the subscription list should be given in the prospectus.
7. The amount payable on application and allotment on each share should be
stated. If any prospectus is issued within two years, the details of the shares
subscribed for any allotted.
8. The particular about any option or preferential right to be given to any person
to subscribe for shares or debentures of the company.
9. The number of shares or debentures which within the two preceding year
been issued for a considerations other than cash.
10. Particulars about premium received on shares within two preceding years or to
be received.
11. The amount or rate of underwriting commission.
12. Preliminary expenses.
13. The names and addresses of auditors, if any, of the company.
14. Where the shares are of more than one class, the rights of voting and rights as
to capital and dividend attached to several classes of shares.
15. If nay reserve or profits of the company have been capitalized, particulars of
capitalizations and particulars of the surplus arising from any revaluation of the
assets of the company.
16. A reasonable time and place at which copies of all accounts on which the
report of auditors is based may be inspected



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Conclusion
A public company raises its capital from the public and it issues prospectus for this
purpose. Sometimes, the promoters of a company decide not to approach the public
for raising necessary capital. They are hopeful of raising funds from the friends
and relations or through underwriters. In that case a prospectus need not be issued
but a Statement in Lieu of Prospectus must be filed with the registrar at least three
days before the first allotment of shares. Such a statement must be signed by every
person who is named therein as a director or proposed director of the company.
This statement will be drafted strictly in accordance with the particulars set out in a
part I of Schedule III of the Act.