16 prospectus

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PROSPECTUSPROSPECTUS


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ProspectusProspectus

ProspectusProspectus meansmeans anyany documentdocument describeddescribed oror

issuedissued asas aa prospectusprospectus andand includesincludes anyany notice,notice,

circular,circular, advertisementadvertisement oror otherother documentsdocumentsinvitinginviting depositsdeposits fromfrom thethe publicpublic oror invitinginviting

offersoffers fromfrom thethe publicpublic forfor thethe subscriptionsubscription oror

purchasepurchase ofof anyany sharesshares in,in, oror debenturesdebentures of,of, aa

bodybody corporatecorporate..

Sec. 2 (36)Sec. 2 (36)


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DocumentDocument

SubscriptionSubscription Invitation to publicInvitation to public

Offer to publicOffer to public

Essentials of DefinitionEssentials of Definition


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Dating of Prospectus (Sec. 55)Dating of Prospectus (Sec. 55)

To be signed by theTo be signed by the

Director(s) or proposedDirector(s) or proposed

Director(s) or by theirDirector(s) or by theiragent(s) in writingagent(s) in writing

Date of Publication ofDate of Publication of

ProspectusProspectus


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AA copycopy toto bebe delivereddelivered toto thethe RegistrarRegistrarforfor registrationregistration..

RegistrationRegistration toto bebe mademade beforebefore oror onon thethe

datedate ofof publicationpublication.. TheThe copycopy mustmust be be signedsigned by by thetheDirector(s)Director(s) oror proposedproposed Director(s)Director(s) oror byby

theirtheir agentsagents inin writingwriting.. DeliveryDelivery toto thethe RegistrarRegistrar toto bebe mentionedmentioned

inin thethe prospectusprospectus..

Registration of Prospectus (Sec.Registration of Prospectus (Sec.

60)60)


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TheThe prospectus prospectus mustmust alsoalso specifyspecify thatthatnecessarynecessary documentsdocuments andand consentconsent ofof

thethe expertsexperts hashas beenbeen attachedattached toto oror

endorsedendorsed toto thethe copiescopies soso delivereddelivered..

ProspectusProspectus mustmust bebe issuedissued withinwithin 9090

daysdays fromfrom deliverydelivery datedate forforregistrationregistration..

Contd..Contd..


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To keep authenticated records.To keep authenticated records.

To pinpoint the responsibility.To pinpoint the responsibility.

Objects ofRegistrationObjects ofRegistration


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ProspectusProspectus isis thethe windowwindow throughthrough whichwhich

anan investorinvestor cancan looklook inin toto thethe soundnesssoundness

ofof aa companyscompanys venturesventures

DateDate && SignatureSignature

RegistrationRegistration

ExpertsExperts ConsentConsent DisclosuresDisclosures

Contents of ProspectusContents of Prospectus


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StateState thethe mattersmatters specifiedspecified inin PartPart-- II ofof

ScheduleSchedule IIII

SetSet outout thethe reportsreports specifiedspecified inin PartPart IIIIofof ScheduleSchedule IIII

TheThe aboveabove twotwo provisions provisions shallshall havehave

effecteffect subjectsubject toto thethe provisionprovision containedcontainedinin PartPart IIIIII ofof ScheduleSchedule IIII

Contents of Prospectus (Sec. 56)Contents of Prospectus (Sec. 56)


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Contd..Contd..

Amount payable onAmount payable onapplication allotment onapplication allotment oneach shareeach share

Premium on sharesPremium on shares

UnderwritersUnderwriters

Particulars ofAuditorsParticulars ofAuditors

Particulars of any option toParticulars of any option tosubscribe for sharessubscribe for shares

Outstanding litigationOutstanding litigation Management perception ofManagement perception of

risk factorsrisk factors

Details of any issue withinDetails of any issue withinpast 3 yearspast 3 years


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PartPart II of ScheduleII of Schedule IIII

Report by theReport by the

AuditorsAuditors

Report by theReport by theAccountantsAccountants

Consent ofConsent of

Directors, AuditorsDirectors, Auditors

etcetc

Statutory & otherStatutory & other

informationinformation


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ForFor aa companycompany carryingcarrying onon businessbusiness forforlessless thanthan 55 financialfinancial years,years, thenthen thethereferencereference isis toto thethe nono.. ofof financialfinancial yearsyearsforfor whichwhich thethe businessbusiness hashas beenbeen carriedcarried onon..

IfIf thethe prospectus prospectus isis issuedissued moremore thanthan 22yearsyears afterafter thethe datedate atat whichwhich thethe companycompanyisis entitledentitled toto commencecommence business,business,

particulars particulars ofof thethe signatoriessignatories toto thethememorandummemorandum andand sharesshares subscribedsubscribed forfor bybythemthem andand detailsdetails ofof preliminarypreliminary expensesexpensesneedneed notnot bebe givengiven..

PartPart III of ScheduleIII of Schedule IIII


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FullFull frankfrank andand honesthonest disclosuredisclosure ofofallall factsfacts

ScrupulouslyScrupulously accurateaccurate

No No errorerror ofof commissioncommission (Mis(Mis--statements)statements)

NoNo errorerror ofof omissionomission (non(non--disclosuredisclosureofof relevantrelevant facts)facts)

TheThe truetrue naturenature ofof thethe companyscompanys

ventureventure toto bebe discloseddisclosed

Golden RuleGolden Rule


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Experts unconnected with theExperts unconnected with the

formation of the companyformation of the company Statement of consentStatement of consent

Statement by Experts (Sec 57 & 59)Statement by Experts (Sec 57 & 59)


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OfferOffer forfor salesale-- issuingissuing househouse

ProspectusProspectus byby implicationimplication

IntentionIntention toto offeroffer sharesshares oror debenturesdebentures totothethe publicpublic

OfferOffer withinwithin 66 monthsmonths ofof allotmentallotment

OfferOffer mademade whenwhen wholewhole considerationconsiderationnotnot receivedreceived byby companycompany

AdditionalAdditional informationinformation

Deemed Prospectus (Sec 64)Deemed Prospectus (Sec 64)


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WhereWhere aa publicpublic companycompany doesdoes notnot inviteinvitepublic public toto subscribesubscribe forfor itsits shares,shares, butbut

arrangesarranges toto getget moneymoney fromfrom privateprivatesources,sources, itit needneed notnot issueissue aa prospectusprospectus totothethe publicpublic.. InIn suchsuch aa casecase thethe promoterspromoters

areare requiredrequired toto prepareprepare aa draftdraft prospectusprospectusknownknown asas statementstatement inin lieulieu ofof prospectusprospectus

SecSec.. 7070

Statement in Lieu of ProspectusStatement in Lieu of Prospectus


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ItIt shouldshould containcontain thethe informationinformation

requiredrequired toto be be discloseddisclosed byby

scheduleschedule IIIIII ofof thethe ActAct..

TermsTerms ofof contractcontract mentionedmentioned inin

prospectusprospectus notnot toto bebe variedvaried

Contd..Contd..


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Misstatements?Misstatements?

SaySay thatthat somethingsomething isis expectedexpected whenwhen ininrealityreality itit isis notnot

SaySay thatthat thethe DirectorsDirectors havehave anan intentionintention totododo somethingsomething whenwhen theythey havehave nono suchsuchintentionintention

StateState accuratelyaccurately allall thethe relevantrelevant factsfacts andandnotnot toto omitomit anyany factfact whichwhich maymay bebe relevantrelevant

--Golden RuleGolden Rule

MisMis--Statements in ProspectusStatements in Prospectus


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Examples of misExamples of mis--statementsstatements

Suppression of material factsSuppression of material facts

1.Rex vs Kylsant1.Rex vs Kylsant

Material fact (i.e. rate of dividend calculated notMaterial fact (i.e. rate of dividend calculated notfrom trading account but out of realized capitalfrom trading account but out of realized capital

profit) was suppressed. Thus managing directorprofit) was suppressed. Thus managing directorwas held guilty of fraudwas held guilty of fraud


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LiabilitiesLiabilities

Civil LiabilityCivil Liability

Criminal LiabilityCriminal Liability

AnyMisAnyMis--Statement Leads to LiabilityStatement Leads to Liability


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Liability forMis-statements in Prospectus

Civil Liabilities CriminalL

iabilities

Against the Company Against the Directors,

Promoters and

Experts

Rescission

of

Contract

Claim for

DamagesDamages

Compensation

(Sec. 62)Damages

for

Non-

compliance(Sec, 56)

ForFradulent

MisrepresentationFor Innocent

Misrepresentation


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Civil LiabilityCivil Liability

Against the companyAgainst the company

-- Rescission of contractRescission of contract

-- Claim for DamagesClaim for Damages

Against the promoters,Directors and other officersAgainst the promoters,Directors and other officers

-- DamagesDamages

-- Compensation under section 62 andCompensation under section 62 and 5656


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FineFine uptoupto RsRs.. 5050,,000000//-- oror ImprisonmentImprisonment uptoupto 22 years,years, oror

BothBoth

PenaltyPenalty forforFraudFraud (Sec(Sec 6868)) FineFine uptoupto RsRs.. 11,,0000,,000000 oror

ImprisonmentImprisonment uptoupto 55 years,years, oror

BothBoth

AllotmentAllotment onon FictitiousFictitious NamesNames (Sec(Sec 6868A)A)

ImprisonmentImprisonment uptoupto 55 yearsyears

Criminal LiabilityCriminal Liability


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Services and Exchange Board ofServices and Exchange Board ofIndia (SEBI)India (SEBI)--Administrative AuthorityAdministrative Authority

Companies (Amendment) Act ,2000 hasCompanies (Amendment) Act ,2000 hasmade SEBI the administrative authority.made SEBI the administrative authority.

Complaints about violations regardingComplaints about violations regardingprospectus should be made to SEBI.prospectus should be made to SEBI.

SEBI is vested with powers to enquire intoSEBI is vested with powers to enquire into

such complaints and punish those foundsuch complaints and punish those foundguilty.guilty.


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MeaningMeaning ofof shelfshelf ProspectusProspectus

ShelfShelf ProspectusProspectus meansmeans aa prospectusprospectusissuedissued byby anyany financialfinancial institutioninstitution oror bankbank

forfor oneone oror moremore issuesissues ofof thethe securitiessecurities ororclassclass ofof securitiessecurities specifiedspecified inin thetheprospectusprospectus

ValidityValidityValidValid forfor aa periodperiod ofof oneone yearyear fromfrom thethe datedateofof openingopening ofof thethe firstfirst offeringoffering ofof thethe shelfshelf--

prospectusprospectus

Shelf Prospectus & InformationShelf Prospectus & Information

Memorandum (Sec 60A & 60B)Memorandum (Sec 60A & 60B)


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InformationInformation MemorandumMemorandum

ForFor subsequentsubsequent offering,offering, informationinformation

memorandummemorandum updatingupdating thethe informationinformationunderunder thethe variousvarious headsheads willwill havehave toto bebefiledfiled andand entireentire setset comprisingcomprising ofof shelfshelf

prospectusprospectus andand thethe memorandummemorandum shallshallconstituteconstitute thethe prospectusprospectus andand havehave totobebe circulatedcirculated toto thethe generalgeneral publicpublic

Contd..Contd..


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MeaningMeaning

AA redred--herringherring prospectusprospectus isis aa prospectus,prospectus, whichwhichdoesdoes notnot havehave completecomplete particularsparticulars onon thethe priceprice

ofof securitiessecurities offeredoffered andand quantumquantum ofof securitiessecuritiesofferedoffered.. ThisThis meansmeans thatthat inin casecase thethe priceprice isis notnotdisclosed,disclosed, thethe numbernumber ofof sharesshares andand thethe upperupperandand lowerlower priceprice bandsbands areare discloseddisclosed.. AnAn issuerissuer

cancan specifyspecify thethe issueissue sizesize andand thethe numbernumber ofofsharesshares areare determineddetermined laterlater..

RedRed Herring ProspectusHerring Prospectus

16 prospectus

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