Write short notes on Prospectus and Statement in lieu of Prospectus.

Prospectus:

Public company to carry on the business after registration, has to get a certificate of commencement of business from the Registrar of Companies. For this, promoters have to prepare a document called Prospectus. Prospectus is a document which is made in order to invite public to subscribe to the company’s shares. It is prepared after the company gets incorporation because now, the directors have to raise the capital required to run a company.

It provides all kinds of information about the company so that public can easily subscribe to the capital. Content of the prospectus is mentioned in the Companies Act, so that the promoters do not get any chance to hide any important point from the public or mislead them. Before issuing a prospectus to the public, company is required to file a copy of the prospectus with the Registrar of Companies.

Statement in lieu of Prospectus:

It is not important for a private company to issue prospectus because under law they are not permitted to invite public to subscribe to its shares. It is essential for a public company to issue prospectus only if they wish to invite public to raise the company’s capital. If they don’t require public for raising capital and can make arrangements of raising capital with the help of their friends, relatives or underwriters, it is not required for them to issue a prospectus. But instead, they have to file a statement in lieu of Prospectus with the Registrar. Such a statement must be signed by all the directors of the company and then filed with the registrar.