Report Writing

HOW TO PREPARE A PROSPECTUS ?

by : DR. T.K. JAINAFTERSCHOOL centre for social entrepreneurship sivakamu veterinary hospital roadbikaner 334001 rajasthan, indiaFOR PGPSE PARTICIPANTS mobile : 91+9414430763

WHAT IS A PROSPECTUS?

WHEN A PUBLIC COMPANY ISSUES SHARES / DEBENTURES / ANY OTHER SECURITY, IT HAS TO ISSUE PROSPECTUS / RED HERRING PROSPECTUS / STATEMENT IN LIEU OF PROSPECTUS.

CAN A PRIVATE COMPANY ISSUE PROSPECTUS?

NO

CHARACTERISTICS

Signed by directors + CS must bear a date must be as per SEBI guidelines + companies actmust be registered with ROCit is a public invitation

Attachments to prospectus

Schedule II Expert consent (if they have given any statement) (sec. 56) copy of contractsconsent of auditors / legal advisors

Approval of prospectus

Lead financial institutions lead managers to issue stock exchanges (where the company is listed / proposed to be listed) vetting by SEBI

Submission to ROC

Before issue of prospectus, it should be submitted to ROC (sec. 60) from this date, prospectus has to be issued to public in 90 days. If issued without registration (with ROC), penalty on officer 50000

Format

Click the links below : http://www.moneycontrol.com/ipo/ipofaq.phphttp://www.sebi.gov.in/dp/usheragro.pdfhttp://www.sebi.gov.in/dp/power.pdf

http://www.sebi.gov.in/dp/power.pdf

PART I OF SCHEDULE II

Capital structureissue guidelinesminimum subscriptiondate of opening and closing of issue risk perception of management general information & litigation matters names of stock exchanges etc.

PART II OF SCHEDULE II

CONSENT OF EXPERTSCONSENT OF DIRECTORSREPORT OF AUDITORS & ACCOUNTANTSTERMS OF LOANS

Sebi guidelines

http://www.sebi.gov.in/SectIndex.jsp?sub_sec_id=4

What is minimum subscription

It must be mentioned in prospectus as per SEBI guidelines : 90% is minimum subscription

Issue norms

Issue norms must be given in prospectus. Issue must be made in 30 days of public issue closure (otherwise penal interest @15%) refund orders (if any must be despatched in 78 days). Allotment must be made by board of directors / proper authority

GOLDEN RULE

Kindersely : in Brunswick etc. v/s Muggeridge (1860) : the person issueing prospectus must give every information stricktly and scrupulously and must not omit any material information

Important rules

Experts opinion only after obtaining written consent by experts Director names only after obtaining written consent by director to become the directorthe experts mentioned must not be connected to formation of the company (indemnify if there is false information)

When can registrar refuse to register a prospectus

It is not datedit is not signedit is not accompanied with documentsit is not as per company law & SEBI guidelines

WHAT IS RED HERRING PROSPECTUS

IT GIVES RATES IN RANGE IT IS NOT GIVING FINAL RATES OF ISSUES

SHELF PROSPECTUS

SEC. 60 a (as per 2000 amendment of companies act) : when a bank / public financial institution repeatedly issues capital, it can issue shelf prospectus it is valid for 1 year during this time, the company can again and again go for public issue on the basis of same shelf prospectus, but each time it has to issue information memorandum (sec. 2(19B)

STATEMENT IN LIEU OF PROSPECTUS

1. when a private company becomes a public company (within 30 days) 2. when public company is not issueing shares to public, they have to issue this. 3. when a public company doesnt allot shares to public it must have contents similar to prospectus, penalty if untrue statement : 10000http://www.vakilno1.com/bareacts/companiesact/s44.htm

BE A PROMOTOR

A Promotor is a person who sets up a company. As a promotor, you have to think about the idea and convert this idea into a company. As a promotor, you have to set up initial contracts so that company becomes operational.

Steps ......

Prepare Memorandum of association (as per format) in at least 3 copesPrepare Articles of association (as per format) in at least 3 copes (or apply Table A of schedule I) Prepare agreements with directorsSubmit declaration to Registrar of company that all formalities have been fulfilled (by company secretary) prepare prospectus go ahead for raising money for your dream ideas

LEGAL FORMS

Form NO. 1 : declaration of all the formalities of company (to be filed with registrar of comapnies ). for other forms and their structure, click on the following link :http://www.mca.gov.in/MCA21/dca/downloadeforms/Download_eForm_choose.html http://www.vakilno1.com/froms_html/co_form.htm

INCORPORATION

Registrar of companies will issue a certificate of incorporation. (Sec. 33, 34 of companies act) this is conclusive evidence that the company is registered.

Can you start a business ?

Private company can start it immediately on getting certificate of incorporation, but a public company will have to obtain a certificate of commencement of business to start business. See this link also : http://www.legalserviceindia.com/company law/company_formation_procedure.htm

Commencement of business

Public company can start business only on fulfilling following formalities : 1. directors have purchased qualification shares2. prospectus / statement in lieu of prospectus has been prepared and submitted3. minimum subscription has been obtained.

PRELIMINARY CONTRACTS

These contracts are made before a company has been given certificate of incorporation. These contracts have no legal validity against company and the contractor cannot sue the company. The promotors are personally liable for such contracts.

PROVISIONAL CONTRACTS (ONLY FOR PUBLIC COMPANY)

These contracts are made before a company has been given certificate of commencement of business but after certificate of incorporation. These contracts have no legal validity against company until the company obtains certificate of commencement of business. Once the company obtains this certificate these contracts are enforceable against company.

FORMAT OF MEMORANDUM

MOA must be in following format : Schedule I : Table B / C / D / EB : for limited by sharesC : for guarantee D : guarantee + share capital E : for unlimited company

MOA

Memorandum of association must have : NAMEPLACEOBJECTLIABILITYCAPITAL SIGNATURE AND ASSOCIATION CLAUSE

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5 DECEMBER 09

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