Prospectus

Definition u/s. 2(29)

1. Means any document described or issued as prospectus 2. Includes any, a. Notice b. Circular c. Advertisement; or d. Other communication Inviting offers from public for subscription or purchase. Other than deposits invited by banking company or financial institutions Whether described as prospectus or not.

Prospectus

Issued as prospectus u/s. 57

Deemed prospectus u/s. 61

Publication of Prospectus: means giving in newspaper of 1. English; or 2. Urdu and 3. Daily circulation in province

Contents of Prospectus
Objects Capital Structure Redeemable Capital Qualification shares of Directors Profile of the board Amount payable with application Subscription day Share issue other than cash Premium or discount Underwriters Underwriters Commission Property purchased Preliminary expenses Benefits to promoters Particulars of Contracts Auditors Extend of Directors interest Voting & other rights Minimum Subscription

Types of Prospectus
By implication Notice Circular Advertisement Other communication media

Purpose of Prospectus
Invites for Shares Debentures Deposits

Approval, issue and registration of Prospectus u/s. 57

1. Issue Condition a. Company shall issue, circulate or publish any prospectus or other document with the approval of the commission. b. Commission may impose such conditions as it may deem necessary c. Company can issue prospectus without approval, if approval of the commission has been obtained within the period of sixty days preceding the date of its issue. 2. Issue Process Basic Requirements (u/s. 57(3)) a. Before issue of prospectus i. Deliver copy to registrar; ii. Authorized in writing, attaching1. Consent u/s. 55; and 2. Incase of Prospectus issued generally, also a. Copy of every Contract required by Clause 161, Part 1 2nd Schedule or Memorandum giving full particulars; and b. Report required by Part II of Schedule or Adjustments and reason mentioned in Clause 362, Part I of Schedule. 3. Requirements a. Every Prospectus shall(u/s. 57(4)) i. State copy has been delivered to registrar ii. Specify any documents required to be attached to copy or refer to included statements which specify those documents; and iii. Where application has been made, or is proposed to be made, to a stock exchange for the listing of the security, state such application has been made or is proposed to be made b. Prospectus to be dated (u/s. 52) c. Experts Statement by expert3 who is unconnected with formation or management of company (u/s. 54) d. Experts consent to issue of prospectus containing statement by him (u/s. 55) i. Written consent ii. Statement that consent has not been withdrawn e. Requirements u/s. 53 i. Matters & reports specified in Section 1 & 2 of part I of 2nd Schedule
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Clause 16, Part I 2nd Schedule: 1. The dates of, parties to, and general nature ofa. Every contract appointing or fixing the remuneration of a chief executive, managing agent, if any, or secretary, whenever entered into, that is to say, whether within, or more than, two years before the date of the prospectus; b. Every other material contract, not being a contract entered into in the ordinary course of the business carried on by the company or a contract entered into more than two years before the date of the prospectus. 2. A reasonable time and place at which any such contract or a copy thereof may be inspected 2 Clause 36, Part I 2nd Schedule: Any report required by section 2 of this Part shall eithera. Indicate by way of note any adjustments as respects the figures of any profits or losses or assets and liabilities dealt with by the report which appears to the persons making the report necessary; or b. Make those adjustments and indicate that adjustments have been made. 3 Expert: Includes an engineer, a valuer, an accountant and every other person whose profession gives authority to a statement made by him

ii. Sufficient number of copies of prospectus made available 1. At Registered office of Company 2. at which company is listed 3. or proposed to be listed 4. with the bankers iii. Prospectus to be in full text or in such abridged for as may be prescribed iv. Published in at least one Urdu and one English daily Newspaper v. Prospectus be issued or an advertisement 1. not less than 7 days before the subscription list is due to open; or vi. not more than 30 days before the subscription list is due to open

Listed u/s. 2(19) In relation to securities, means securities which have been allowed to be traded on stock exchange Listed Company u/s. 2(20) Means a company or a body corporate or other body whose securities are listed

Deemed Prospectus u/s. 61

Any document by which the offer for sale to the public is made shall be deemed to be a Prospectus issued by the company. Offer for sale where a company allots or agrees to allot any shares in or debentures of the company. All enactments and rules of law as to the contents, filing and registration of a prospectus and as to liability in respect of statements in and omission from prospectus shall apply with following modifications. o In addition to requirement u/s. 53, prospectus shall state The net amount of consideration received or to be received in respect of shares or debentures offered; and The place and time at which the contract for allotment may be inspected. o Provisions u/s. 57 as to approval, issue & registration of prospectus, shall have effect as if the persons making the offer were persons named in a prospectus as directors of a company. o If a person making an offer is a company or firm, it shall be sufficient if the document (i.e. deemed prospectus) is signed on behalf by Two directors of the company; or By not less than one-half of the partners in the firm; and Any such director or partner may sign by his agent authorized in writing.

Evidence of Deemed prospectus offer for sale to the public u/s. 61(2)
1. Offer was made within 1 year after the allotment or agreement to allot; 2. At the date when the offer was made; the whole of the consideration to be received by the company had not been received by it; or 3. that an offer for sale to the public was made in pursuance of an understanding to which the company was directly or indirectly a party or a condition imposed by any authority in relation to the position, business or privileges of the company

Offer of shares or debentures for sale by certain Persons u/s.62

Person holding more than 10% Share or Debentures of a company shall offer for sale to the public only with the approval of Commission. Any document by which an offer for such sale to the public is made shall deem to be a prospectus. If a person making an offer is a company or a firm, it shall be sufficient if document is signed, on behalf of Company by two directors of the company; or by not less than one-half (50%) of the partners in the firm

Issue of Securities outside Pakistan u/s. 62A

Company can only issue with the prior approval of the commission.

A notice, circular, advertisement or other document soliciting bids, offers, proposals or tenders for sale of shares or other securities acquired in the course of normal business or for negotiating sale thereof or expressing an intention to disinvest such shares or other securities issued by a scheduled bank or a financial institution shall not be deemed to be a prospectus or an offer for sale to the public for the purposes of sections 61 and 62. [U/s. 62(5)]

Restriction on Commencement of business (Public Company) u/s. 146

A public limited company cannot commence its business or exercise its borrowing powers unless:1. The Registrar has issued a Certificate for Commencement of Business4 that will be conclusive evidence that the company is so entitled; 2. Any contract made by a company before the date at which it is entitled to commence business shall be provisional only and shall not be binding on the company. Remember, company not being entitled to commence, can offer for subscription or allotment or receive any money payable on application for debentures

Requirement for Certificate for Commencement of Business

The Registrar issues the Certificate for Commencement of Business only if the following requirements have been fulfilled: There has been filed with the Registrar of Companies a duly verified declaration by the chief executive or one of the directors and the secretary in the prescribed form that the following conditions have been complied with o Shares held subject to the payment of the whole amount thereof in cash have been allotted to an amount not less in the whole than the minimum subscription o Every director of the company has paid to the company the full amount on each of the shares taken or contracted by him and for which he is liable to pay in cash o No money is or may become liable to be repaid to applicants for any shares or debentures which have been offered for public subscription by reason of any failure to apply for or to obtain permission for the shares or debentures to be dealt in on any stock exchange In the case of a company which has not issued a prospectus file with the Registrar of Companies, a statement in lieu of prospectus
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Certificate of Commencement u/s. 146: Certificate required to be obtained by a public company before it commences any commercial transactions.

Statement in lieu of Prospectus u/s. 69

A Public Company having share capital, which a. Does not issue a prospectus on formation; or b. Has issued a prospectus on formation but does not proceed to allotment. Shall only allot its share or debentures, if it delivers to registrar for registration at least three days before the first allotment, a statement called, a statement in lieu of prospectus signed by person named as director or proposed director of the company or by his agent authorized in writing.

Alteration of Prospectus & Statement in lieu of Prospectus u/s. 58

Terms of contract can only be varied with approval in general meeting of the company.

Underwriting
A company or other entity that administers the public issuance and distribution of securities from a corporation or other issuing body An underwriting company markets shares for company to its potential shareholders.

Underwriting Agreement
Certain number of shares No change in clauses without prior consent Responsibility only on unsubscribed part Authorization to allot shares Underwriting Commission

Key terms
Mens rea: Criminal Intent Bona fide: In good faith Mala fide: With bad intention Ex-gratia: out of love/grace Ex-officio: Due to official Capacity Civil liability: Liable to pay some amount Criminal Liability: liable to be put behind bars (imprisonment)

Mis-statements in Prospectus
u/s. 59 & 60

Additional Sections
63, 64, 65 & 66