A prospectus plays an important role as it is a legal document that contains all the general, financial, and statutory information of the company. It is a formal document that invites offers from the public for subscribing to its shares, And this document is issued by a public company. It helps the investors make investment decisions as it has all the specific details such as price and share details of the company.
A document needs to contain certain information to be called a prospectus. First, it should invite the general public for the subscription of shares. A Prospectus Must be made to the general public and must be made by the company. the information related to shares and debentures must be present in the document.
Section 26 of the Companies Act 2013 defines the issue of the prospectus. a prospectus needs to be issued 90 days before the date from which a copy was delivered before the registrar and if the company does not issue the prospectors then it is considered to be invalid. The company will be punished with a fine of 50,000 which may exceed 3,00,000 if the prospectus that was issued by the company is in contravention under section 26 of the act.
A prospectus must contain information like the registered company office address, the names, and address of the company secretary, auditors, underwriters, bankers etcetera. The company prospectus must have the name of the company, nature of the business, qualification shares of the directors, names and address of the signatory and number of shares subscribed to them, the capital structure of the company, purpose of the issue, objects of the company, particulars of debentures, redeemable preference shares, and remove narration of directors and promoters.
The details of the underwriter and underwriting Commission and brokerage must be mentioned in the prospectus. Minimum subscription of allotment and date of opening and closing off issue is also required to be mentioned in a company prospectus. The expected rate of dividend and voting rights as well as particulars of materials documents should be in a prospectus.
Red herring, shelf, abridged and deemed prospectus are 4 different types of a prospectus.
A red herring prospectus is the offer document. It contains the details about the offer of the securities but The quantum of the issue and the price of securities is not included in the offer document. The red herring prospectus is not a final prospectus and can be updated several times before the finalization of the same. Red herring prospectus needs to be filed at least 3 days before the opening offer by the issuer company.
A shelf prospectus is used when a company wants to issue more than one issue from a single document. Financial institutions and banks are some examples who usually issue self prospectus. As there is more than one issue covered a company will not we needed to file a fresh prospectus at every issue since the company has already filed it once with ROC.
Anna bridge prospectus contains salient features of a prospectus and has information in brief which helps the investors to take decisions quickly. Abridged prospectors need to be attached to every application form if a company needs to purchase securities.
A deemed prospectus is a document that is issued in case of an offer for sale of securities to the public and it invites the public to purchase the shares of the company through an issuing house or any other intermediary. A deemed prospectus is an invitation to the public.