Chap 6: Prospectus

Question 1

What is prospectus

Answer 1

Documents offering securities to public.
*securities include Debt and shares both

Question 2

What is not a prospectus?

Answer 2

Invitation of deposit by banks/NBFC

Question 3

Purpose of prospectus

Answer 3

When public company offers securities to general public.
(Not required for private placement)

Question 4

Timing of prospectus

Answer 4

After incorporation (even before certificate of commencement of business)
Expire after certain period of time

Question 5

Procedures for issuance of prospectus

Answer 5

1. BOD decides to issue shares to general public
2. Prospectus is prepared including necessary information (directors + expert)
3. Apply to commission for approval (21 days before proposed date of publication)
4. Publish prospectus in English+Urdu daily newspaper in full or abridged form (within 60 days of approval)
5. Make sufficient copies available free at specified places
6. Start public subscription (7-30 days after issuance of prospectus)

Question 6

Approval of commission not required in following cases

Answer 6

Offer to members/employees (of their family members)
Bonus shares
Private placement
Issued by SBP
Issued shares in subsidiary as dividend

Question 7

Specified places to make prospectus available

Answer 7

Registered office
Website
Stock exchange
Banker
Share registrar
Ballotter
Credit rating agency
(From date of publication to closing of subscription)

Question 8

Prospectus (registrar)

Answer 8

Filing on or before date of publication
Signed by each director (penalty level 2)

Question 9

Prospectus (registrar) statement in lieu of prospectus

Answer 9

Public company issues Share through private placement where no prospectus is needed. It need to file statement in lieu of prospectus to registrar

Question 10

Expert (conditions)

Answer 10

Independent of mgmt, formation and promotion
Written consent
Mentioned in prospectus about consent and not withdrawn

Question 11

Offence - criminal liability

Answer 11

Incorrect or misleading statement
Omit required information

Question 12

Offence - who is liable

Answer 12

Every offeror/issuer
Every director or
Any other person who signed it (expert)

Question 13

When Liable (offence)

Answer 13

There is misstatement in prospectus
A person
.relied on prospectus
.acquired securities
.suffered los

Question 14

What is liability (offence)

Answer 14

Compensate loss

Question 15

Liability of secp

Answer 15

Not liable for any misstatement in prospectus approved by it

Question 16

Certificate of commencement of business who is required?

Answer 16

Every public company having share capital

Question 17

Certificate of commencement of business is not required for

Answer 17

-Private company
-Company converted from private to public after one year
-Company not having share capital

Question 18

Restrictions on not having certificate of commencement of business for public company

Answer 18

Start its operations -sale purchase k agreement nahi krskti
Borrowing power

Question 19

Requirement to obtain Certificate of commencement of business

Answer 19

Cheif executive (or director) and company secretory file declaration to registrar that
1. Shared allotted to minimum subscription
2. Directors paid in full for share taken
3. No money payable to applicants (in public subscription)

File statement in lieu of prospectus (if not public subscription)