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7/31/2019 Prospectus MBA PPT
1/20
PROSPECTUS
Definition :Prospectus means
any document described or issued as aprospectus &includes any notice , circular ,
advertisement or other document inviting
deposits from the public or inviting offers from
the public for the subscription of shares or
debentures of a co.
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Dating : must be dated
Signing : a. Intended coproposed
directors must be signed.
b. Existing coevery person
who is named as director.
Registration : a. must be registered on orbefore the date of publication.
b. penalty for non- registration:
Rs.50,000/- .
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CONTENTS OF
PROSPECTUSMatters to be stated and reports to be set out in
Prospectus. Important contents of prospectus areas follows
Part I of schedule II : General Information Capital structure of the co
Terms of the present issue
Particulars of the issue
Co , Management and Project
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Part II of schedule II :
General Information
Financial Information
Statutory and other Information
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MISSTATEMENTS IN PROSPECTUS &
THEIR CONSEQUENCES
If there is any mis-statement of a material
fact in a prospectus.
OR
If the prospectus is wanting in any material
fact ,there may arise-
a. Civil Liability
b. Criminal Liability
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Civil Liability
I. Remidies against the co
1. Rescission of the contract
- He should apply for rescission
- Gets back money paid by him with
interest
Case : Rex vs Lord Kylsant
2. Damages for deceit (MONEY,MENTAL
STRAIN)
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II. Remedies against the Directors , Promoters
and Experts
1. Liability for damages for misstatement in
prospectus
2. Liability under the General Law
sec 17 of Indian Contract Act, 1872 for
fraud
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Criminal Liability
Every person who is authorized to
issue prospectus is punishable with
Imprisonment which may extend to 2 yrs or
Fine with Rs.50,000/- or
With Both
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Statement In Lieu of Prospectus
Where a public co does not invite public to
subscribe for its shares , need no issue
prospectus to public, In such case the promoters
are required to prepare a draft prospectus known
as a statement in lieu of prospectus whichshould contain the information required to be
disclosed by Schedule III of the Act
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SHARES
The capital of a co is divided into certain
divisible units of a fixed amount. These units are
called Shares.
Types of Shares :
There are 2 kinds of shares
I. Preference shares
II. Equity shares
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PREFERENCE SHARES
They have a preferential right to be paid dividendduring the life time of the co.
They have a preferential right to the return ofcapital when the co goes into liquidation.
KINDS OF PREFERENCE SHARES :
1. Cumulative Preference Shares
Dividend goes on accumulating till it is fully paidoff.
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2. NonCumulative Preference Shares
3. Participating Prefrence Shares
Entitled fixed rate of dividend + share in thesurplus profits.
4. NonParticipating Preference Shares
Only a fixed rate of dividend
5. Convertible Prefrence Shares
Convertible into equity shares
6. NonConvertible Prefrence Shares
7. Redeemable Prefrence Sharesa. Articles should permit
b. Can be redeemed only out of profit
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EQUITY SHARES
Equity shares are those which are not
prefrence shares.
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DEBENTURES
A co needs money to finance its activitiesfrom time to time.
a. A part their requirement is met by issue
of shares.
b. For the rest the co may resort to
borrowing.
The co borrows money by issue ofdebentures.
Debenture is issued by the co and it isusually in the form of a certification which is anacknowledgement of indebtedness.
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The debenture of a co are moveable
property , transferable in the mannerprovided by the Articles.
A debenture holder does not have any rightto vote in the co meetings.
KINDS OF DEBENTURES :
Debentures may be of the following kinds
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1. Bearer Debentures :
Also known as Unregistered Debentures
payable to its bearer. And also these areregarded as Negotiable Instruments.
2. Registered Debentures :
Payable to registered holder whose nameappears both on certificate and in the cosregister. They are transferable.
3. Secured Debentures :
Debentures which create some charge on theproperty of the co.
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4. Unsecured Debentures
5. Redeemable Debentures
They may be redeemed after sometime.
6. Irredeemable or Perpetual Debentures
There is no period fixed for repayment of the
principal amount.7. Convertible Debentures
Can be converted into preference or equityshares.
8. NonConvertible DebenturesThey are to be duly paid as and when they
mature.
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DIRECTORS
A co is an artificial person. It cannot act in its ownperson. It acts through the Directors.
The Directors , who occupy very important
position in the co , are considered to be thebrain of a co.
No body corporate , association or firm can beappointed director of a co.only an individual can
be appointed as Director.
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Number of Directors :
Public cominimum 3
Private cominimum 2
APPOINTMENT OF DIRECTORS :
1. First Directors
Usually named in the article
Not namedsubscribers appoint
In the absence of (a) or (b)subscribers hold the
office until directors are duly appointed.
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2.Appointment of Directors by the co
In the case of a public co or a private co which is
subsidiary of a public co at least 2/3rd of the total
number of directors shall be liable to retire by
rotation.
Directors are appointed by shareholders ingeneral meeting.
3. Appointment of Directors by Directors