Home | ARTS | Business Environment and Law | Definition of Prospectus And Statement In Lieu Of Prospectus

Business Environment and Law-Prospectus And Statement In Lieu Of Prospectus

Definition of Prospectus And Statement In Lieu Of Prospectus

   Posted On :  08.05.2018 08:00 am

A prospectus means any document described or issued as prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate.

Definition of Prospectus:
 
 
Sec 2 (36) A prospectus means any document described or issued as prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in or debentures of a body corporate. Thus, a prospectus is not merely an advertisement; it may be a circular or even a notice.

A document shall be called a prospectus it satisfies two things:

1. It invites subscriptions to shares or debentures or invites deposits.
2. The aforesaid invitation is made to the public.

The Board attends to the following matters:

1. Appointment of various expert agencies such as bankers, auditors, secretary, etc.
2. Entering into underwriting contract, brokerage contracts.
3. Making arrangements for the listing of shares on stock exchanges.
4. Drafting a prospectus for the purpose of issue to the public.

Underwriting

 
Underwriting, in its simplest form, consists of an undertaking by some person or persons that if the public fails to take up the issue, he or they will do so. In return for this undertaking, the company agrees to pay the underwriter a commission on all shares or debentures, whether taken up by the public or by he underwriters.
 

Sub-Underwriting

 
The underwriters usually choose to spread their risk by using sub-underwriters who agree to take a certain number of shares for which they accept responsibility and for which they receive a commission out of the commission received by the underwriters. The difference between the commission paid by the company to the principal underwriters and the commission paid by them to the sub-underwriters is known as overriding commission.
 

Brokerage Contracts


There must be authority in the articles to pay brokerage, and the brokerage must be disclosed in the prospectus, or statement in lieu of prospectus, as the case may be, and it should pay a reasonable brokerage (Sec. 76).
Tags : Business Environment and Law-Prospectus And Statement In Lieu Of Prospectus
Last 30 days 28 views

OTHER SUGEST TOPIC