mentioned in the prospectus must be correct and real. In addition to this the company should also mention the information about possible risk of the investors.
2. Importance of Prospectus:
(1) Useful information for prospectus : Prospectus provides information about the name of the company, kind of share capital, authorized share capital, Issued share capital, working area of company, future plans of the company etc. which is useful to the investors to make decision regarding investing in the company.
1. Introduction: Prospectus is an important document for public because relying upon this document the investor decides to invest in the company. For this reason all the information (2) Information of main officers : Prospectus includes the information about the names and addresses of all directors, Managing directors and the amount of guarantee to purchase qualification share which creates trust among investors.
(3) Purpose of document : The purpose of this document is to provide information to the public. If it contains misleading information or misrepresentation then it is considered as Breach of trust on investors. Special provisions are kept in the Companies Act to prevent false or misleading statement in the prospectus.
(4) ResponsIbility of officers : Sometimes investors are misguided by the false information presented in the prospectus and it causes loss to them. To prevent this situation there is a provision in Companies act that the officers who have given such false, misleading statement or information in the prospectus of a company are held liable. (5) Present true financial situation: Prospectus presents true financial position of the company. By referring this document, investors get the idea of reality of the company. Investors inspired to purchase shares of the company on the basis of its Economic solvency.
(6) Information of possible risks : In the prospectus there is a mention about the possible risks of a project of a company. As a resultant effect investor can take appropriate decision. Therefore it is said that prospectus should be unambiguous and clear as well as transparent like water.
3. Conclusion: Prospectus is issued after the establishment of the company to collect share capital but it also included information about the contract done prior to establishment. This information is also useful for the investors to take decision on investment.