According to Section 2(36) of the
Companies Act, any document inviting the public to buy its shares or debentures
comes under the definition of prospectus. It also applies to advertisements
inviting deposits from the public.
A prospectus is “the only window through
which a prospective investor can look into the soundness of a company’s
venture”. Hence it must specify at least the following matters as per Schedule
The prospectus contains the main
objectives of the company, the name and addresses of the signatories of the
Memorandum of Association and the number of shares held by them.
The name, addresses and occupation of
directors and managing directors.
The number and classes of shares and
The qualification share of directors and
the interest of directors for the promotion of company.
The number, description and the document
of shares or debentures which within the two preceding years have been agreed
to be issued other than cash.
The name and addresses of the vendors of
any property acquired by the company and the amount paid or to be paid.
Particulars about the directors,
secretaries and the treasures and their remuneration.
The amount for the minimum subscription.
If the company carrying on business, the
length of time of such businesses.
The estimated amount of preliminary
Name and address of the auditors,
bankers and solicitors of the company.
Time and place where copies of balance
sheets, profits and loss account and the auditor’s report may be inspected.
The auditor’s report so submitted must
deal with the profit and loss of the company for each year of five financial
years immediately preceding the issue of prospectus.
profit or reserve has been capitalized, the particulars of such
capitalization will be stated in the prospectus.