Define prospectus. Why is it issued? Explain the consequences of misstatements ina prospectus.
Define prospectus. Why is it issued? Explain the consequences of misstatements ina prospectus.
A prospectus is any document described or issued. It includes any notice, circular, advertisement or other documents, inviting deposits from the public or inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. In simple words, it is an invitation to the public to apply for shares and debentures of the company or to make deposite in the company.
Purpose of the prospectus:
1. Prospectus contains the printed summary of the company's past history, if any, its present status and its future prospectus.
2. It informs the public about the company and stimulates people to make an investment in the company.
3. It is an authentic record of terms and conditions on which the shares and debentures have been issued.
4. It shows business policies and programmes of the company.
Consequences of misleading prospectus:
The persons responsible for preparing false and misleading prospectus will face the civil and criminal liability.
(a) Civil Liability: In case misleading prospectus amounts to misrepresentation aggrieved party can repudiate the contract and can claim a refund of their money.
(b) Criminal Liability: In case any deliberate concealment is made, directors will be punished with a fine of Rs. 5000 or imprisonment upto two years or both.
A prospectus is any document described or issued. It includes any notice, circular, advertisement or other documents, inviting deposits from the public or inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate. In simple words, it is an invitation to the public to apply for shares and debentures of the company or to make deposite in the company.
Purpose of the prospectus:
1. Prospectus contains the printed summary of the company's past history, if any, its present status and its future prospectus.
2. It informs the public about the company and stimulates people to make an investment in the company.
3. It is an authentic record of terms and conditions on which the shares and debentures have been issued.
4. It shows business policies and programmes of the company.
Consequences of misleading prospectus:
The persons responsible for preparing false and misleading prospectus will face the civil and criminal liability.
(a) Civil Liability: In case misleading prospectus amounts to misrepresentation aggrieved party can repudiate the contract and can claim a refund of their money.
(b) Criminal Liability: In case any deliberate concealment is made, directors will be punished with a fine of Rs. 5000 or imprisonment upto two years or both.
