Question

State with reasons whether the following statements are True or False:

A public company need not issue prospectus for raising capital.

• A. True
• B. False

Answer 1

The correct option is B False

(i) A prospectus usually is in the form of a statement giving all material information about the company and showing its future prospects.

(ii) It aims at inviting investors to subscribe for its shares and debentures.

(iii) It is a must for every public company to prepare its prospectus.

(iv) It is through the prospectus that the prospective investors know details of the shares offered by the company.

(v) Otherwise, the investors would have no idea of the shares that a public company is selling

(vi) All detailed information about a company like its business, management, financial structure etc. are provided in the prospectus.

(vii) The main idea to issue a prospectus is to collect capital for the company from the general public.

(viii) Although the main aim of the prospectus is to invite or attract investors towards the company still no mis-statement or false claim shall be made in it to deceive the investors.

(ix) It should contain true, fair and correct information.

(x) Hence, it is very necessary fora public company to issue a prospectus, as it has to collect its capital from the general public.