FabReads Digest with Law 060 – Prospectus (Law of Business Association)

FabReads Digest with Law 060 – Prospectus (Law of Business Association)

This is a way of raising money from the capital market instead of going to collect loan from the bank. This is achieved by selling your shares to members of the public.

The ISA and the CAMA 1990 are the Act that regulates the prospectus. See S67-96. S567 interpretation Claus of CAMA defines a prospectus as “Notice, circular, advertisement or other invitation offering to the public for subscription or purchase any shares or debentures of a company and includes any document which say to the extent that it offers securities for a consideration other than cash, is a prospectus”. Nb, A debenture is like a loan to the company and you get your share after the profits of the company. S315 ISA 2007 defines a prospectus as “any written or electronic information, notice, advertisements or other forms of invitation offering to the public for subscription or purchase, any shares, debentures or other approved and recognized securities of a company and other issues or scheme”. S315 ISA 2007 Defines an Expert as “every engineer, legal practitioner, accountant and any other person whose profession gives authority to a statement made by him”. S77 of the ISA requires an expert statement on a prospectus and non-compliance attracts upon conviction a fine of #100,000 or imprisonment of not less than 3years or both.

A public company employs a prospectus as an invitation to a treat for members of the public to subscribe for shares in the company. In other words, members of the public are invited to table offers to the ‘issuing house’ marketing the shares of a public company and it is the prerogative of the issuing house to accepts or decline the offers. What happens when shares are under subscribed? After all the issuing house hopes to make a profit.

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