expression was defined by the Companies Act, 1900, as meaning "any prospectus, notice, circular, advertisement, or other invitation, offering to the public for subscription or purchase any shares or debentures of a company." The legal aspect of a prospectus is of material interest to at least two parties : the directors and promoters of a company who have issued a prospectus ; and original shareholders and debenture holders in the company who have acquired their holdings on the strength of the state ments contained in the prospectus. And the company itself may have an in terest in the prospectus akin to that of directors in a case where it has been issued by the authority of, or ratified and adopted by the company, or the latter has allotted shares to applicants who have applied therefor, to its know ledge, as a result of the statements in the prospectus. Directors are par ticularly interested in a prospectus because they are responsible for the statements contained therein, and are liable to subscribers who may have suffered in consequence of its misrepresentations, suppressions of truth, and non-compliance with statutory requirements. Shareholders or debenture holders, in cases where they have become such because of misrepresentations, suppressions, non-compliance—and even ambiguities—may be entitled, as a consequence, to rescind—in certain cases before liquidation only—their contracts for shares and their allotments thereof, or to sue for damages, or to pursue both these remedies.
Statutory Act of 1908 has, in great detail, enume rated a number of conditions with which a prospectus should comply if the directors desire to avoid heavy penalties, and that allotments of shares made thereon should be valid and binding upon the 'allottees. Some preliminary points may be noticed. A prospectus must always be dated ; and that date, unless the contrary is proved, will be taken to be the date of its publication. A copy must be signed by every person who is named therein as a director or proposed director, or by his agent authorised in writing. So signed, it should be filed with the registrar of joint-stock companies on or before the date of its publication. No prospectus can be lawfully issued until filed for registration, and every prospectus must state on the face of it that it has been so filed.
Particulars required to be set forth in a prospectus. There are fourteen groups of such particulars, and these are required to be inserted in " every prospectus issued by or on behalf of a company, or by or on behalf of any person who is or has been engaged or interested in the formation of the company." (1) There must be stated the contents of the memorandum of association, with the names, descriptions and addresses of the signatories, and the number of shares subscribed for by them respectively. And also the number of founders or management shares, if any, and the nature and extent of the interest of the holders in the property and profits of the company. (2) The number of shares, if any, fixed by the articles of association as the qualifica tion of a director, and any provision in the articles of association as to the remuneration of the directors. (3) The names, descriptions, and addresses of the directors or proposed directors. (4) The minimum subscription on which the directors may proceed to allotment, and the amount payable on application and allotment on each share ; and, in the case of a second or subsequent offer of shares, the amount offered for subscription on each previous allotment, and the amount actually allotted ; and the amount, if any, paid on such shares. (5) The number and amount of shares and
debentures which within the two preceding years have been issued, or agreed to be issued, as fully or partly paid up otherwise than in cash, and in the latter case the extent to which they are so paid up, and in either case the consideration for which such shares or debentures have been issued or are pro posed or intended to be issued. (6) The names and addresses of the vendors of any property purchased or acquired by the company, or proposed so to be purchased or acquired, which is to be paid for wholly or partly out of the proceeds of the issue offered for subscription by the prospectus, or the pur chase or acquisition of which has not been completed at the date of the issue of the prospectus, and the amount payable in cash, shares, or debentures to the vendor, and where there is more than one separate vendor, or the company is a sub-purchaser, the amount so payable to each vendor. Where the vendors or any of them are a firm, the members of the firm are not to be treated as separate vendors. (7) The amount (if any) paid or payable as purchase-money in cash, shares, or debentures, of any such property as aforesaid, specifying the amount payable for goodwill. (8) The amount (if any) paid within the two preceding years, or payable, as commission for subscribing or agreeing to subscribe, or procuring or agreeing to procure subscriptions, for any shares in or debentures of the company, or the rate of any such commission. It is not necessary, however, to state the commission payable to sub-underwriters. (9) The amount, or estimated amount, of preliminary expenses. (10) The amount paid within the two preceding years, or intended to be paid, to any promoter, and the consideration for any such payment. (11). The dates of and parties to every material contract, and a reasonable time and place at which any material contract or a copy thereof may be inspected. This requirement does not apply, however, to a contract entered into in the ordi nary course of the business carried on or intended to be carried on by the company, or to any contract entered into more than two years before the date of the publication of the prospectus. (12) The names and addresses of the auditors (if any) of the company. (13) Full particulars of the nature and extent of the interest (if any) of every director in the promotion of or in the property proposed to be acquired by the company, or, where the interest of such a director consists in being a partner in a firm, the nature and extent of the interest of the firm, with a statement of all sums paid or agreed to be paid to him or to the firm in cash or shares or otherwise by any person either to induce him to become, or to qualify him as a director or otherwise for services rendered by him in connection with the promotion or formation of the com pany. (14) Where the company is a company having shares of more than one class, the right of voting at meetings of the company conferred by the several classes of shares respectively.