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Business Studies

Functions of Financial Market

Is it compuls...

Question

Is it compulsory for a Private Ltd. Company to issue prospectus?

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Solution

Prospectus is a detailed statement that must be issued by a company that goes public. However, private limited companies do not need to issue a prospectus because the public is not invited to subscribe for the shares of the company.

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Is it essential for a private company to issue a prospectus or a statement in lieu of prospectus? Why or why not?

A private company does not issue prospectus.

Q. Mark the following statements True or False:
(a) A private company must file a statement in lieu of prospectus.
(b) A company which does not want to prepare its own Articles of Association can adopt Table A.
(c) A company wanting to raise capital must issue a prospectus.
(d) A private company can start its business immediately after incorporation.
(e) Capital clause is a part of the Articles of Association.
(f) The Memorandum of Association defines the relationship of a company with or outsiders.
(g) Every company must issue a prospectus to raise share capital.

Q. When there is a conversion of a private company into a public company ________ prospectus must be issued.

A prospectus is issued by

(a) A private company

(b) A public company seeking investment from public.

(c) A public enterprise

(d) A public company

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