Prospectus

Prospectus is an invitation to the public to subscribe for its shares or debentures. A prospectus has been defined as “any document described or issued as a prospectus and included notice, circular advertisement or other document inviting offers from the public for the subscription or purchase of any shares in, or debentures of, a body corporate.” The main purpose of the prospectus is to pursue the public to purchase the shares or debentures of the company.
A public company is required to publish a prospectus whenever it wants to make a public issue of its shares or debentures. Everything stated in the prospectus must be correct because prospectus is the basis of contract between the company and the intending purchaser of shares who buys shares on the faith of a prospectus. Therefore, a shareholder has the right to rescind the contract within a reasonable time and before the winding up of the company if the prospectus contains a misleading statement.

Statement in lieu of Prospectus:
A public company, which does not raise its capital by public issue, need not issue a prospectus. In such a case a statement in lieu of prospectus must be filed with the Registrar 3 days before the allotment of shares or debentures is made. It should be dated and signed by each director or proposed director and should contain the same particulars as are required in case of prospectus proper.