Prospectus

Prospectus

• Is prepared by founders of the company or an issuing house after the registration of a public limited company.
• Is sent for approval to the registrar of companies before members of the public are invited to subscribe for shares.
• Issued to members of the public by public limited companies only.
• Contains the following:
• an application form for members of the public who wish to buy shares.
• A closing date for the application.
• A narration of the history and background of the company up to present time.
• A summary of the future plans of the company.
• The current financial position of the company.
• The profit record of the company.
• The number of shares to be sold to the public.
• The price for each share.
• A statement to the effect that a request has been made for permission to quote shares on the stock exchange.

Importance:

• acts as an invitation (advertisement) to members of the public to buy shares.
• Useful to an investor who wants to assess his risk in making an application to buy shares.

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