Question

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

Prospectus is prepared only for filing with the Registrar.

• A. True
• B. False

Answer 1

The correct option is B False

(i) Prospectus aims at inviting investors to subscribe for its shares and debentures.

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

(iii) The main idea to issue a prospectus is to collect capital for the company.

(iv) It is must, for every public company to prepare its prospectus.

(v) Sometimes a public company may not raise its capital by issuing shares to the public, but a company can raise capital through private sources.

(vi) In such cases, a company need not draft and issue a prospectus.

(vii) That is why, a company files a 'statement' instead of prospectus to the Registrar.

(viii) Such a statement is called a statement-in-lieu of prospectus.

(ix) So, it is a statement-in-lieu of prospectus which is drafted for filing purpose only and not the prospectus.