Public issue is the most
prevalent and popular
method, for raising funds in the primary market. Under
this method the issuing company makes a direct appeal to the
prospective investors to invest their funds in the securities of the
company. Public issues of securities means selling or marketing
of shares and/or debentures for subscription by the public by issue
of prospectus. Public issue through prospectus has maintained
its lion's share in the primary capital market. It has been
provided in the Section 98A of the Indian Companies Act, 1913 that
any document by which the offer for sale to the public is made
is deemed to be a prospectus by all purposes. Therefore, according
to this provision offer for sale is also a public issue. Yet, for our
current study we have considered only public issue through
prospectus and excluded offer for sale.
Legally speaking, no company can raise funds from the
public without issuing prospectus as prescribed by the Companies
Act 1956. According to the Section 64 of the Act, "Any document
containing offer of shares or debentures for sale will be deemed to
be a prospectus". The Act also says, "A prospectus is a notice,
circular, advertisement or any other document inviting or purchase
of shares or debentures of a body corporate."
A document is not a prospectus unless it is an invitation
to the public to subscribe for shares or debentures of a company.
Such an invitation can be made by a public limited company. In
case where a company arranges to get money from private sources,
it need not issue a prospectus. A statement in lieu of
prospectus with information required is to be disclosed by Schedule III of
the Companies Act 1956 [Section 70(i)] and the same should be
filed with the Registrars of Companies (ROC) three days before the
allotment of shares or debentures. |
