Stock Market and Prospectus
Chapter 5
PROSPECTUS
DEFINITION [SECTION 2(36)]
• Any document inviting deposits from the public for the subscription or purchase of any securities of a body corporate. Following types of documents are prospectus: - ❑ Any document described or issued as prospectus; including ❑ any notice, ❑ circular, ❑ advertisement or ❑ other document • Ingredient to constitute a “prospectus” i) There must be an “invitation to the public”; ii) The invitation must be made by or on behalf of the company or in relation to an intended company; iii) The invitation must be “to subscribe or purchase “ iv) The invitation must relate to securities or such other instrument. • Invitation to public means An offer or invitation shall be treated as made to the public; keeping in view all circumstances as calculated to result directly or indirectly, it may properly be regarded, the securities of the company become available for subscription or purchase by persons other than those receiving the offer or invitation. [The word "calculated" in suggests design, forethought or intention to accomplish a purpose.] • The test is not who receives the offer but who accepts the offer.
CASE EXAMPLES
In Pramatha Nath Sanyal Vs Kali Kumar Dutt, an advertisement was inserted in a newspaper stating, “Some shares are still available for sale according to the terms of the prospectus of the company which can be obtained on application”. This was held to be a prospectus as it invited the public to purchase the shares. The prosecution was accordingly launched on the Directors for non-compliance.
“Public” is a general word, and includes any section of the public. This means that if a document inviting persons to buy shares is issued for example to all advocates or to all doctors, or to all foreigners living in India or to all Indian citizens or to all shareholders in a particular company, it will still be deemed to be issued to the
PROSPECTUS
DEFINITION [SECTION 2(36)]
• Any document inviting deposits from the public for the subscription or purchase of any securities of a body corporate. Following types of documents are prospectus: - ❑ Any document described or issued as prospectus; including ❑ any notice, ❑ circular, ❑ advertisement or ❑ other document • Ingredient to constitute a “prospectus” i) There must be an “invitation to the public”; ii) The invitation must be made by or on behalf of the company or in relation to an intended company; iii) The invitation must be “to subscribe or purchase “ iv) The invitation must relate to securities or such other instrument. • Invitation to public means An offer or invitation shall be treated as made to the public; keeping in view all circumstances as calculated to result directly or indirectly, it may properly be regarded, the securities of the company become available for subscription or purchase by persons other than those receiving the offer or invitation. [The word "calculated" in suggests design, forethought or intention to accomplish a purpose.] • The test is not who receives the offer but who accepts the offer.
CASE EXAMPLES
In Pramatha Nath Sanyal Vs Kali Kumar Dutt, an advertisement was inserted in a newspaper stating, “Some shares are still available for sale according to the terms of the prospectus of the company which can be obtained on application”. This was held to be a prospectus as it invited the public to purchase the shares. The prosecution was accordingly launched on the Directors for non-compliance.
“Public” is a general word, and includes any section of the public. This means that if a document inviting persons to buy shares is issued for example to all advocates or to all doctors, or to all foreigners living in India or to all Indian citizens or to all shareholders in a particular company, it will still be deemed to be issued to the