prospectus and allotment presentation
DESCRIPTION
Prospectus and Allotment PRESENTATIONTRANSCRIPT
Definition •Prospectus is a document, containing the
advertisement for invitation of subscription from the public.
•It is a legal document that institution and business use to describe the securities they are offering for participants and buyers.
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Importance of Prospectus•It provides the investor with material
information about mutual funds, stocks of the company, bond issued by the company and other investments made by the company.
• It also tells the investor about the financial position of the company, the biography of the officers, directors, the CEO and other key information which an investor required before making the investment.
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Matters to be stated in Prospectus•Following matters and reports are to be
set out in a prospectus:-▫The contents of MOA and AOA▫The name, addresses, description and
occupation of the signatories to the MOA and number of shares subscribed by them.
▫The number and values of shares.▫Description of business to be undertaken.
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▫Any provision in the AOA as to remuneration of directors.
▫The names, occupation and description of directors.
▫The time and date of the opening of subscription.
▫The financial statement of the company.▫The profit and loss statement of the
company.
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Approval, issue and registration of Prospectus•The prospectus of every company shall
not be issued, circulated, or published unless prior approval of SECP, and for the purposes of obtaining permission from SECP the company must required to submit the prospectus sixty days prior to subscription.
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Penalty for wrongly issuance of Prospectus •If a prospectus is issued in contravention
of the Ordinance, the company and every person, shall be punishable with fine which may be extended to five thousand rupees.
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Terms in prospectus cannot be changed•A company shall not, very the terms of the
contract specified in the prospectus, except prior approval form the SECP.
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Civil Liability for mis-statement in prospectus• If a prospectus invites persons to subscribe
for shares or debentures of a company, and the persons purchase such shares or debentures while relying on the faith of the prospectus, thereafter he sustain loss or damage then following persons are liable for the loss:▫Every person who is director of the company
when the prospectus was issued▫Every person who is named in the prospectus▫Every person who is a promoter of the company▫Every person who has given consent in the
issuance of the prospectus
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Exemption from civil-liability•Following persons are exempted from the
Civil Liability:-▫Any person who is a director and he withdrew
his consent before the issue of the prospectus,▫The prospectus was issued without his
authority and consent▫The prospectus was issued without his
knowledge and consent▫That after the issue of prospectus, but before
the allotment he withdrew his consent.
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Criminal liability for misstatement•If a prospectus includes any untrue
statement every person who signed or authorized the issue of the prospectus shall be punishable:▫With imprisonment for a term of two years▫With fine which may extent to ten thousand▫With both
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Newspaper advertisement of Prospectus •Every prospectus for the public
subscription shall be published in the newspaper advertisement.
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Contents of Prospectus•Name of the company•Address of Registered office•Main business•Capital of the company•Existing paid up share capital•New paid up share capital•Capital to be raised
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•Associate and Subsidiary/ Holding Companies
•Financial information and operational results
•Management i.e. Chief Executive, Directors, Company Secretary, Chief Accountant etc.
•Feasibility Report•Plans and Future prospects.
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Detailed process of Public Subscription• Approval by BOD• Application for obtaining permission for Public
Subscription from SECP.• When the permission is granted by the SECP the
stock exchange concerned is contacted for providing the date for subscription and the bankers are contracted for the purpose.
• The approval remain valid for 60 days.• After the above process the Prospectus is
published in at least two dailies one English and other Urdu newspaper, circulated in the province in which the stock exchange is listed, exists.
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Under writing •Securities underwriting refers to the
process by which investment banks or institutions raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt capital).
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• This is a way of selling a newly issued security, such as stocks or bonds, to investors. A syndicate of banks (the lead-managers) underwrite the transaction, which means they have taken on the risk of distributing the securities. Should they not be able to find enough investors, they will have to hold some securities themselves. Underwriters make their income from the price difference (the "underwriting spread") between the price they pay the issuer and what they collect from investors or from broker-dealers who buy portions of the offering.
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Allotment •Shares and Debentures
▫Shares: these are the certificate of ownership in the assets of the company.
▫Debentures: these are the loan certificates which a company issues after obtaining loan from the public.
Difference between Shares and Debentures•The common point between the two is
that both the certificates are issued by the Company, in order to obtain finances from the public, however there are certain differences between the two;▫Ownership:The shareholders are the
owners of the company, on the other hand the debenture holder is just a creditor.
▫ Profit : the share holder is entitled to receive the profit which a company may get after the deduction of expenses, and if a company does not obtain any profit during the year, the shareholder will get nothing, the profit which is given to the shareholders is known as “Dividend” on the other hand the Debenture holder is entitled for a specific interest quarterly or annually, and this interest is not linked with the profit of the company.
▫ Contract: there is no contract between the shareholder and the company, while there is a loan agreement between the company ad debenture holder.
▫Priority: in the case of the winding up of a company, the debenture holders are given priority upon the share holders towards the distribution of assets of the company.
Allotment how made? •The company issues Prospectus/statement
in lieu of Prospectus, and applications are invited for the subscription of shares or debentures.
•The applications are EXAMINED•Balloting for successful candidates within
ten days of the closing of Subscription.
▫Refund of payment to unsuccessful candidates within 10 days of the balloting
▫Allotment of shares▫Listing in the stock exchange.▫Issuance of certificates.
Restrictions on allotment• There are certain restrictions on the allotment
of shares and debentures;▫ No application shall be entertained unless it is
accompanied by such nominal price, specified by the SECP.
▫ The applications must be in accordance with the form specified by the SECP.
▫ No allotment shall be made unless the minimum subscription is raised, and the minimum subscription is to be calculated by the BOD.
Separate Bank account•The company is required to open a
separate bank account for the purposes of obtaining public subscription in a scheduled Bank.
Refund schedule •The company is required to refund the
amount to the un-successful candidates within ten days after the balloting, and in case of failure every director and officer responsible shall be liable to pay a surcharge to the applicant along with the damage he sustained.
Usage of Money•The money which is deposited with the
company regarding the purchase of shares or debentures can only be used for that purpose, not else. Further the company cannot obtain any benefit from said deposited money.
Irregular allotment•Any allotment which is not made in
accordance with Companies Ordinance, is voidable, and any application in this regard can be made out within 30 days calculating from the date of allotment, and if it is declared that allotment is irregular then every responsible officer is liable to compensate.