How To Prepare A Prospectus

HOW TO PREPARE A PROSPECTUS
by :
DR. T.K. JAIN
AFTERSCHO☺OL
centre for social entrepreneurship
sivakamu veterinary hospital road
bikaner 334001 rajasthan, india
FOR – PGPSE PARTICIPANTS
mobile : 91+9414430763
5 DECEMBER 09 www.afterschool.tk 1
WHAT IS A PROSPECTUS?
WHEN A PUBLIC COMPANY ISSUES

SHARES / DEBENTURES / ANY OTHER
SECURITY, IT HAS TO ISSUE
PROSPECTUS / RED HERRING
PROSPECTUS / STATEMENT IN LIEU OF
PROSPECTUS.
CAN A PRIVATE COMPANY
ISSUE PROSPECTUS?
NO
CHARACTERISTICS
Signed by directors + CS
must bear a date
must be as per SEBI guidelines + companies
act
must be registered with ROC
it is a public invitation
Attachments to prospectus
Schedule II
Expert consent (if they have given any
statement) (sec. 56)
copy of contracts
consent of auditors / legal advisors
Approval of prospectus
Lead financial institutions

lead managers to issue
stock exchanges (where the company is listed /
proposed to be listed)
vetting by SEBI
Submission to ROC
Before issue of prospectus, it should be

submitted to ROC (sec. 60)
from this date, prospectus has to be issued to
public in 90 days.
If issued without registration (with ROC),
penalty on officer – 50000
Format
Click the links below :

http://www.moneycontrol.com/ipo/ipofaq.php
http://www.sebi.gov.in/dp/usheragro.pdf
http://www.sebi.gov.in/dp/power.pdf
http://www.sebi.gov.in/dp/power.pdf
PART I OF SCHEDULE II
Capital structure
issue guidelines
minimum subscription
date of opening and closing of issue
risk perception of management
general information & litigation matters
names of stock exchanges etc.
PART II OF SCHEDULE II
CONSENT OF EXPERTS
CONSENT OF DIRECTORS
REPORT OF AUDITORS &
ACCOUNTANTS
TERMS OF LOANS
Sebi guidelines
http://www.sebi.gov.in/SectIndex.jsp?sub_sec_id=4
What is minimum subscription
It must be mentioned in prospectus – as per

SEBI guidelines : 90% is minimum
subscription
Issue norms
Issue norms must be given in prospectus. Issue

must be made in 30 days of public issue
closure (otherwise penal interest @15%)
refund orders (if any must be despatched in 78
days).
Allotment must be made by board of directors /
proper authority
GOLDEN RULE
Kindersely : in Brunswick etc. v/s Muggeridge

(1860) : the person issueing prospectus must
give every information stricktly and
scrupulously and must not omit any material
information
Important rules
Experts opinion only after obtaining written

consent by experts
Director names only after obtaining written
consent by director to become the director
the experts mentioned must not be connected
to formation of the company
(indemnify if there is false information)
When can registrar refuse to
register a prospectus
It is not dated
it is not signed
it is not accompanied with documents
it is not as per company law & SEBI guidelines
WHAT IS RED HERRING
PROSPECTUS
IT GIVES RATES IN RANGE – IT IS NOT

GIVING FINAL RATES OF ISSUES
SHELF PROSPECTUS
SEC. 60 a (as per 2000 amendment of
companies act) : when a bank / public financial
institution repeatedly issues capital, it can issue
shelf prospectus
it is valid for 1 year – during this time, the
company can again and again go for public
issue on the basis of same shelf prospectus, but
each time it has to issue information
memorandum (sec. 2(19B)
STATEMENT IN LIEU OF
PROSPECTUS
1. when a private company becomes a public
company (within 30 days)
2. when public company is not issueing shares
to public, they have to issue this.
3. when a public company doesnt allot shares
to public
it must have contents similar to prospectus,
penalty if untrue statement : 10000
http://www.vakilno1.com/bareacts/companiesact/s44
BE A PROMOTOR
A Promotor is a person who sets up a

company.
As a promotor, you have to think about the
idea and convert this idea into a company. As a
promotor, you have to set up initial contracts
so that company becomes operational.
Steps ......
Prepare Memorandum of association (as per format) in at

least 3 copes
Prepare Articles of association (as per format) in at least 3
copes (or apply Table A of schedule I)
Prepare agreements with directors
Submit declaration to Registrar of company that all
formalities have been fulfilled (by company secretary)
prepare prospectus
go ahead for raising money for your dream ideas
LEGAL FORMS
Form NO. 1 : declaration of all the formalities

of company (to be filed with registrar of
comapnies ). for other forms and their
structure, click on the following link :
http://www.mca.gov.in/MCA21/dca/downloadeform
http://www.vakilno1.com/froms_html/co_form.htm
INCORPORATION
Registrar of companies will issue a certificate

of incorporation. (Sec. 33, 34 of companies
act) this is conclusive evidence that the
company is registered.
Can you start a business ?
Private company can start it immediately on

getting certificate of incorporation, but a public
company will have to obtain a certificate of
commencement of business to start business.
See this link also :
http://www.legalserviceindia.com/company law/com
Commencement of business
Public company can start business only on

fulfilling following formalities :
1. directors have purchased qualification shares
2. prospectus / statement in lieu of prospectus
has been prepared and submitted
3. minimum subscription has been obtained.
PRELIMINARY CONTRACTS
These contracts are made before a company

has been given certificate of incorporation.
These contracts have no legal validity against
company and the contractor cannot sue the
company. The promotors are personally liable
for such contracts.
PROVISIONAL CONTRACTS
(ONLY FOR PUBLIC
COMPANY)
These contracts are made before a company
has been given certificate of commencement of
business but after certificate of incorporation.
These contracts have no legal validity against
company until the company obtains certificate
of commencement of business. Once the
company obtains this certificate – these
contracts are enforceable against company.
FORMAT OF MEMORANDUM
MOA must be in following format :

Schedule I : Table B / C / D / E
B : for limited by shares
C : for guarantee
D : guarantee + share capital
E : for unlimited company
MOA
Memorandum of association must have :
NAME
PLACE
OBJECT
LIABILITY
CAPITAL
SIGNATURE AND ASSOCIATION
CLAUSE
THANKS....
GIVE YOUR SUGGESTIONS AND JOIN
AFTERSCHOOOL NETWORK / START
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How To Prepare A Prospectus

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HOW TO PREPARE A PROSPECTUS

WHEN A PUBLIC COMPANY ISSUES

Lead financial institutions

Before issue of prospectus, it should be

Click the links below :

It must be mentioned in prospectus – as per

Issue norms must be given in prospectus. Issue

Kindersely : in Brunswick etc. v/s Muggeridge

Experts opinion only after obtaining written

IT GIVES RATES IN RANGE – IT IS NOT

A Promotor is a person who sets up a

Prepare Memorandum of association (as per format) in at

Form NO. 1 : declaration of all the formalities

Registrar of companies will issue a certificate

Private company can start it immediately on

Public company can start business only on

These contracts are made before a company

MOA must be in following format :

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