Page 260 - DMGT407Corporate and Business Laws

Unit 11: Prospectus, Shares and Share Capital

or stock-invest or stop payments for such payments shall be void. Further, the applicants Notes
shall be entitled to receive a refund or return of its postdated cheques or stock-invest or
subscription moneys on cancellation of its application, as if the said application had never
been made and the applicants are entitled to receive back their original application and
interest at 15% from the date of encashment till payment of realization.
(ix) Upon the closing of the offer of securities, a final prospectus stating therein the total
capital raised, whether by way of debt or share capital and the closing price of the securities
and any other details as were not complete in the red-herring prospectus shall be filed in
a case of listed public company with SEBI and Registrar and in any other case with the
Registrar only.

11.1.18 Statement in Lieu of Prospectus (S.70)

If a public company makes a private arrangement for raising its capital then it must file a
statement in lieu of prospectus with the Registrar at least three days before any allotment of
shares or debentures can be made. Schedule III contains a model form of a Statement in Lieu of
Prospectus in pursuance of s.70; Schedule IV contains a model form of a Statement in Lieu of
Prospectus when a private company is converted into a public company in pursuance of s.44. If
allotment of shares or debenture is made without filing the Statement in lieu of prospectus, the
allottee may avoid it within two months after the statutory meeting, or where no such meeting
is to be held, within two months of the allotment. Contravention also renders the company and
every director liable to a fine up to ` 10,000.

Self Assessment

Fill in the blanks:
1. A document shall be called a ………………if it satisfies two things which includes It
invites subscriptions to share or debentures or invites deposits and the aforesaid invitation
is made to the public.
2. A copy of the prospectus duly signed by every director or proposed director must be
delivered to the …………………before its publication.

3. For purposes of registration of a prospectus under s.60, the persons making the offer of
sale to the public are to be deemed as …………………of the company.

11.2 Liability Concerning Prospectus

11.2.1 Liability for Untrue Statements in the Prospectus (Ss.62-63)

The prospective shareholders are entitled to all true disclosures in the prospectus. The persons
issuing the prospectus are bound to state everything accurately and not omit material facts.
What is an untrue statement? According to s.65 (1): (a) A statement included in a prospectus shall
be deemed to be untrue, if the statement is misleading in the form and context in which it is
included; and (b) where the omission from a prospectus of any matter is calculated to mislead,
the prospectus shall be deemed in respect of such omission, to be a prospectus in which an
untrue statement is included. The expression ‘included’ with reference to a prospectus means,
included in the prospectus itself or contained in any report or memorandum appearing on the
face thereof or by reference incorporated therein or issued therewith.

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