Legal Question in Business Law in Pakistan

Re: Prospectus-Companies Ordinance 1984

Prospectus: It is defined any document described or issued as prospectus, and included any notice, circular, advertisement, or other communication, inviting offers from the public for the subscription or purchase of any shares in, or debenture of, a body corporate.

Statement in lieu of Prospectus: It may be defined as “a public document prepared, in form prescribed, by every such public company which does not issue a prospectus on its formation, for filing with the Registrar before allotment of shares or debentures and signed by every person who is named therein as a director or by his agent duly authorized in writing.”

Commencement of business requires issuance of the prospectus for the invitation of shares to general public, but if company does not want to float shares is required to submit to Registrar a statement in lieu of prospectus. Business cannot be started unless prospectus is issued and shares are invited and required level of capital is subscribed.

Capital clause: This clause contains the registered or authorized or nominal capital divided into shares. If the authorized capital is Rs. 100,000/-, it may be divided @ Rs. 10/- per share into 10,000/- shares. Normally issued capital achieves its subscription, which leaves good gesture on the part of company. Equation of both issued and subscribed capital increase goodwill of the company. Law does not allow reduction in capital.

Sale of shares is inviting general public to purchase shares to become shareholders in the company.