What is a prospectus? Do all the companies issue it? What could be an alternative to prospectus? Write a few lines about it.

Prospectus:

 
A prospectus is an invitation to the public to purchase shares or debenture of a company. In other words a prospectus may be defined as any document that includes any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any share or debentures of a body corporate.

No, all the companies do not issue a prospectus. Only the Public Limited Companies having permission from the Securities and Exchange Commission may issue a prospectus.

Alternative to a prospectus:

 
As per Section-141 a Public Limited Company having a share capital and not issuing prospectus must at least 31 days before the first allotment of shares or debentures, file with the Registrar for registration a statement in lieu of prospectus. The statement must be in the form prescribed in schedule - IV of the Companies Act-1994. Every private limited company which is converted to a public limited company shall also a statement in lieu of Prospectus as per Schedule-V.

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What contracts are required to be made under the Seal of a company?

Use of common seal: 

 
The common seal of the company shall not be affixed to any instrument except by the authority of resolution of the Board of Directors, and in the presence of at least two Directors and of the secretary or such other person as the directors may appoint for the purpose, and those two directors and secretary or other person as aforesaid shall sign every instrument to which the seal of the company is so affixed in the their presence.

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Describe the legal positions of pre-incorporation contracts. What are the exceptions to those contracts?

Pr-incorporation contract: 

 
A company cannot be bound by a contract which was made on its behalf by any person and excluding a promoter before the company itself had been formed. The company cannot ratify any pre-incorporation contract and the promoters will be personally liable.

In these circumstances, the simplest and safest course for promoter is to bring the negotiation to the point of agreement but to postpone any binding contract until the company is formed and can enter into the contract for itself. In this regard a fresh contract can be accorded by the company after the incorporation.

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Discuss the provisions of section 150 of the Act about the Restriction on Commencement of Business.

Certificate of commencement of business: (Section 150)

A company (Public Limited) shall not commence any business or exercise any borrowing powers unless:

a) Shares held subject to the payment of whole amount thereof in cash have been allotted to an
amount not less than the minimum subscription;

b) Every Director of the company paid in cash each of the share held;

c) A certificate of compliance by the Company Secretary or a Director that above formalities have
been complied;

d) A statement in lieu of prospectus has been submitted where no prospectus is issued for invitation to subscribe the share to the public.

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Describe the provisions of the section 211 of the Companies Act concerning appointment and termination of auditors.

Special notice shall be required for a resolution at an annual general meeting appointing as auditor a person other than a retiring auditor, or providing expressly that a retiring auditor shall not be reappointed.

On receipt of such notice the company shall forthwith send a copy thereof to the retiring auditor.

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What is the tenure of an auditor duly approved in an AGM of a limited company?

Every company shall appoint an auditor or auditors to hold office from the conclusion of annual general meeting until the next annual general meeting and shall within seven days of the appointment, give intimation thereof to every auditor so appointed.

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What do you understand by the pre-emptive rights of shareholders in respect of further issue of shares?

Where the directors decided to increase the subscribed capital of the company by issue of further shares within the limit of the authorized capital, such further shares shall be offered to the members in
proportion, to the capital paid up on the existing share held by such member, irrespective of class, at the date of the offer. This is the per-emptive rights of shareholders to get such offer.

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