Question

State with reasons whether the following statement is True or False:

Prospectus is a charter of the company.

• A. True
• B. False

Answer 1

The correct option is B False

(i) Prospectus is an invitation to public to purchase its shares and debentures.

(ii) It is issued after the formation of company.

(iii) The Memorandum of Association on the other hand is a basic or fundamental or prim' document of a company.

(iv) It lays down the ranges of its activities.

(v) It is a public document and can be inspected by those who deals with the company.

(vi) It states the nature of business activities: to:be conducted by the company.

(vii) It defines the relationship between the company and the outsiders.

(viii) All companies have to prepare their own Memorandum of Association.

(ix) It is submitted to the Registrar of Companies for registration.

(x) It is a charter or constitution of a company.

(xi) No company can be incorporated without Memorandum of Association.

So it is clear, that prospectus is not the charter of the company. The Memorandum of Association is the charter of the-company.