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Stock Market and Prospectus

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Chapter 5

PROSPECTUS

DEFINITION [SECTION 2(36)]

• Any document inviting deposits from the public for the subscription or purchase of any securities of a body corporate. Following types of documents are prospectus: - ❑ Any document described or issued as prospectus; including ❑ any notice, ❑ circular, ❑ advertisement or ❑ other document • Ingredient to constitute a “prospectus” i) There must be an “invitation to the public”; ii) The invitation must be made by or on behalf of the company or in relation to an intended company; iii) The invitation must be “to subscribe or purchase “ iv) The invitation must relate to securities or such other instrument. • Invitation to …show more content…

It must be noted that by virtue of powers under the SEBI Act 1992, every company making a public issue has also to get the Prospectus approval/vetted and obtain in-principal approval of the Central Listing Authority and subsequently obtain approval of the Stock Exchange where at the securities are proposed to be listed. • Section 56 mandates that every prospectus shall be as per Schedule II: - ❑ Part I of Schedule II - the matters specified in and ❑ Part II of Schedule II - the reports therein ❑ Part III of Schedule III – provisions effecting Part I and Part II • SEBI (DIP) Guidelines 2000 also contains provisions, which shall have to be complied with by every company making a public issue. The accountability and responsibility of the Abridged Prospectus is with the SEBI Registered Category I Merchant Banker. • Statements in prospectus should be true, accurate and fair. The Act as well as the SEBI Act 1992 prescribes stringent penal actions on untrue or misrepresentation in the prospectus. • The salient features of such requirements are given below: -

|Companies Act 1956 |SEBI (DIP) Guidelines 2000 |
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