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Chapter: Business Science : Merchant Banking and Financial Services : Issue Management Introduction

Prospectus for Public Offer

1. Regular prospectus 2. Abridged prospectus 3. Prospectus for rights issue 4. Disclosures in prospectus 5. Disclosures in abridged prospectus and letter of offer.

Prospectus is defined a d public are solicited to subscribe to the share capital of a corporate entity. Its purpose is inviting the public for the subscription/purchase of any securities of a company.

PROSPECTUS FOR PUBLIC OFFER 1. Regular prospectus 2. Abridged prospectus 3. Prospectus for rights issue 4. Disclosures in prospectus 5. Disclosures in abridged prospectus and letter of offer


1. REGULAR PROSPECTUS The regular prospectus are presented in three parts




a.  General Information about the company e.g. Name and address of the registered office consent of the Central Government for the issue and names of regional stock exchanges etc.,


b. Capital Structure such as authorized, issued, subscribed and paid up capital etc.,


c. Terms of the issue like mode of payment, rights of instruments holders etc.,


d. Particulars of the issue like project cost, means of financing etc.,


e.  Company, Management and project like promoters for the project, location of the project etc.


f. Disclosures of public issues made by the Company, giving information about type of issue, amount of issue, date of closure of issue, etc.,


g. Disclosure of Outstanding Litigation, Criminal Prosecution and Defaults


h.  Perception of Risk factors like difficulty in marketing the products, availability of raw materials etc.




a. General Information


b. Financial Information like Auditor’s Report, Chartered Accountant's Report etc.,


b.Statutory and Other Information




a. Declaration i.e., by the directors that all the relevant provisions of the companies Act, 1956 and guidelines issued by the Government have been complied with.


b. Application with prospectus


2. ABRIDGED PROSPECTUS The concept of abridged prospectus was introduced by the Companies  (amendment)  Act  of  1988  to  make  the  public  issue  of  shares  an  inexpensive proposition. A memorandum containing the salient features of a prospectus as prescribed is called as ‘Abridged Prospectus’ .


3.  SELECTION OF BANKERS Merchant bankers assist in selecting the appropriate bankers based on the proposals or projects. Because the commercial bankers are merely financiers and their activities are appropriately arrayed around credit proposals, credit appraisal and loan sanctions. But merchant banking include services like project counseling , corporate counseling in areas of capital restructuring amalgamations, mergers, takeover etc., discounting and rediscounting of short term paper in money markets, managing, underwriting and supporting public issues in new issue market and acting as brokers and advisers on portfolio management in stock exchange.


4.   ADVERTISING CONSULTANTS Merchant bankers arrange a meeting with company representatives and advertising agents to finalize arrangements relating to date of opening and closing of issue, registration, of prospectus, launching publicity campaign and fixing date of board meeting to approve and sign prospectus and pass the necessary resolutions. Publicity campaign covers the preparation of all publicity material and brochures, prospectus, announcement, advertisement in the press, radio, TV, investors conference etc., The merchant bankers help choosing the media, determining the size and publications in which the advertisement should appear. The merchant Bankers role is limited to deciding the number of copies to be printed, checking accuracy of statements made and ensure that the size of the application form and prospectus conform to the standard prescribed by the stock exchange. The Merchant banker has to ensure that the material is delivered to the stock exchange at least 21 days before the issue opens and to brokers to the issue, branches of brokers to the issue and underwriter in time. Securities issues are underwritten to ensure that in case of under subscription the issues are taken up by the underwriters. SEBI has made underwriting mandatory for issues to the public. The underwriting arrangement should be filed with the stock exchange. Particulars of underwriting arrangement should be mentions in the prospectus. The various activities connected with pres issue management are a time bound program which has to be promptly attended to. The execution of the activities with clockwork efficiency would lead to a successful issue.




The registrars to an issue, as an intermediary in the primary market, carry on activities such as collecting application from the investors, keeping a proper record of applications and money received from investors or paid to the seller of securities and assisting companies in determining the basis of allotment of securities in consultation with stock exchanges, finalizing the allotment of securities and processing/dispatching allotment letters, refund orders, certificates and other related documents in respect of issue of capital. The share transfer agents maintain the records of holders of securities or on behalf of companies, and deal with all matters connected with the transfer/redemption of its securities. To carry on their activities, they must be registered with the SEBI which can also renew the certificate of registration. They are divided into two categories; a. Category I, to carry on the activities as a registrar to an issue and share transfer agent; b. Category II; to carry on the activity either as a registrar or as a share transfer agent. The registration is granted by the SEBI on the basis of consideration of all relevant matters and, in particular, the necessary infrastructure, past experience and capital adequacy. It also takes into account the fact that any connected person has not been granted registration and any director/partner/principal officer has not been convicted for any offence involving moral turpitude or has been found guilty of any economic offence.


6. CAPITAL ADEQUACY FEE The capital adequacy requirement in terms of net worth (capital and free reserves) was Rs.6 lakh and Rs.3 lakh for Category I and Category II of registrars and share transfer agents respectively. However, the capital adequacy requirements are not applicable since November 1999 for a department/division of a body corporate maintaining the records of holders of securities issued by them and deal with all matters connected with transfer/ redemption of securities. The two categories of registrars and transfer agents had to pay an annual fee respectively of Rs.15, 000 and Rs.10, 000 for initial registration a well as renewal. With effect from November 1999, while Category I is required to pay a registration fee of Rs.50,000 and a renewal fee of Rs.40,000 every three years, Category II has to pay Rs.30,000 and Rs.25,000 respectively.


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Business Science : Merchant Banking and Financial Services : Issue Management Introduction : Prospectus for Public Offer |

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