Question
What do you understand by statement in lieu of prospectus?

Answer

When the promoters of a public company do not want to approach the public for securing the capital and they are in a position to get the subscriptions for shares and debentures from financial institutions or investors, then no prospectus is required to be filed and issued. In such a case, they have to file "statement in lieu of prospectus" atleast three days before they allot the shares. The statement must be duly signed by all the persons named therein as directors. It contains practically similar information as required in the prospectus. The statement is required for the purpose of filing only.

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‘’Ojas Auto Ltd. ‘’ is a very well known auto company in the industry having more of equity share capital than long term debt in its capital structure. It is willing to expand and establish new unit in the backward region and want to train the tribal women in skill Development to empower them. It has a huge amount of cash reserve of Rs. 1000 crores.

(a) what is the status of capital structure of the above company.

(b) According to you, which source of finance should be used by the company in establishing new units? Give any two reasons in support of your answer.

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