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    which among the following prospectus is issued by company prior to the issue of actual prospectus?

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    Question

    A prospectus is issued by _________.

    A

    A private company

    B

    A public company seeking investment from public

    C

    A public enterprise

    D

    A public company

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    Updated on : 2022-09-05

    Solution Verified by Toppr

    Correct option is B)

    A prospectus refers to a legal document issued by the companies that are offering securities for sale. A public company has to issue a prospectus which is an invitation to the public to subscribe to the capital of the company. It is done for raising the required funds from the public. 

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    Companies Act MCQ Part 3 for SEBI Grade A

    Dear aspirants,We are presenting you the Companies Act MCQ Part 3 for SEBI Grade A Companies Act Section of the SEBI Grade A exam. It covers number of

    Companies Act MCQ Part 3 for SEBI Grade A

    Dear aspirants,

    We are presenting you the Companies Act MCQ Part 3 for SEBI Grade A Companies Act Section of the exam.

    Q1. Which section of Companies Act, 2013 states that SEBI has powers to regulate Issue and transfer of securities?

    Section 23 Section 24 Section 25 Section 26

    Answer: (2)The Section 24 of Companies Act 2013 states that Issue and transfer of securities and non-payment of dividend by listed companies or those companies which intend to get their securities listed on any recognised stock exchange in India be administered by the Securities and Exchange Board of India.Q2. Which section of Companies Act 2013 is related to issue of Shelf Prospectus?

    Section 31 Section 32 Section 25 Section 20

    Answer: (1)The provisions relating to the issue of Shelf Prospectus are contained in Section 31 of the Companies Act, 2013.Q3. A company proposing to issue a red herring prospectus shall file it with the Registrar at least ______ days prior to the opening of the subscription list and the offer

    15 10 7 3

    Answer: (4)Such company proposing to issue a red herring prospectus shall file it with the Registrar at least three days prior to the opening of the subscription list and the offer

    Q4. A company filing a shelf prospectus shall be required to file an ______?

    Information Memorandum

    Article of Information

    Article of Association

    Information Article

    Answer: (1)A company filing a shelf prospectus shall be required to file an information memorandum containing all material factsQ5. If a company want to issue securities in stages, which type of prospectus it must issue?

    Red herring prospectus

    Deemed prospectus Shelf prospectus Abridged prospectus

    Answer: (3)Shelf prospectus means a prospectus in respect of which the securities or class of securities included therein are issued for subscription in one or more issues over a certain period without the issue of a further prospectus.Q6. What is the validity period of Shelf Prospectus?

    3 months 6 months 9 months 1 year

    Answer: (4)The validity of the Shelf Prospectus shall be for a period not exceeding one year which shall commence from the date of opening of the first offer of securities under that prospectusQ7. Which among the following prospectus is issued by company prior to the issue of actual prospectus?

    Red herring prospectus

    Deemed prospectus Shelf prospectus Abridged prospectus

    Answer: (1)A company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.Q8. Which among the following prospectus contains salient features of a prospectus is a brief version of the information contained in the prospectus?

    Red herring prospectus

    Deemed prospectus Shelf prospectus Abridged prospectus

    Answer: (4)Abridged Prospectus means a memorandum containing such salient features of a prospectus. It is a brief version of the information contained in the ‘prospectus’ so that cost of public issue of capital may be reduced.Q9. Which section of Companies Act 2013 is related to issue of Red herring Prospectus?

    Section 31 Section 32 Section 25 Section 20

    Answer: (2)The Section 32 of Companies Act, 2013 states that a company proposing to make an offer of securities may issue a red herring prospectus prior to the issue of a prospectus.Q10. Which among the following information is not included in Red herring prospectus?

    Issue Price

    Number of Share offered

    Details of Company Both 1 & 2

    Answer: (4)Red herring prospectus does not include complete particulars of the quantum or price of the securities

    You must also read following MCQs:

    Companies Act MCQ Part 1

    Companies Act MCQ Part 2

    Companies Act MCQ Part 4

    Companies Act MCQ Part 5

    Companies Act MCQ Part 6

    Click to go to SEBI Grade A Preparation PageTags: Companies Act MCQ Part 3, Companies Act MCQ Part 3 Quiz

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    Concept & understanding of Prospectus of Company under Companies Act

    Prospectus of company is basically an invitation to offers from the public. The article focuses on the types, registration of the prospectus of the company.

    Home Companies Act 2013

    Companies Act 2013Generalinternship

    Concept of Prospectus under The Companies Act, 2013

    By Subodh Asthana - June 18, 2019 44855 2 Facebook Twitter Pinterest WhatsApp

    Image Source: Flickr

    The Companies Act, 2013 defines a prospectus under ). Prospectus can be defined as “any document which is described or issued as a prospectus”. This also includes any notice, circular, advertisement or any other document acting as an invitation to offers from the public. Such an invitation to offer should be for the purchase of any securities of a corporate body. Shelf prospectus and red herring prospectus are also considered as a prospectus.

    Essentials for a document to be called as a prospectus

    For any document to considered as a prospectus, it should satisfy two conditions.

    The document should invite the subscription to public share or debentures, or it should invite deposits.

    Such an invitation should be made to the public.

    The invitation should be made by the company or on the behalf company.

    The invitation should relate to shares, debentures or such other instruments.

    Statement in lieu of prospectus

    Every public company either issue a prospectus or file a statement in lieu of prospectus. This is not mandatory for a private company. But when a private company converts from private to public company, it must have to either file a prospectus if earlier issued or it has to file a statement in lieu of prospectus.

    The provisions regarding the statement in lieu of prospectus have been stated under of the Companies Act 2013.

    Advertisement of prospectus

    of the Companies Act 2013 contains the provisions regarding the advertisement of the prospectus. This section states that when in any manner the advertisement of a prospectus is published, it is mandatory to specify the contents of the memorandum of the company regarding the object, member’s liabilities, amount of the company’s share capital, signatories and the number of shares subscribed by them and the capital structure of the company. Types of the prospectus as follows.

    Red Herring Prospectus

    Shelf Prospectus Abridged prospectus Deemed Prospectus

    Shelf Prospectus

    Shelf prospectus can be defined as a prospectus that has been issued by any public financial institution, company or bank for one or more issues of securities or class of securities as mentioned in the prospectus. When a shelf prospectus is issued then the issuer does not need to issue a separate prospectus for each offering he can offer or sell securities without issuing any further prospectus.

    The provisions related to shelf prospectus has been discussed under

    The regulations are to be provided by the Securities and Exchange Board of India for any class or classes of companies that may file a shelf prospectus at the stage of the first offer of securities to the registrar.

    The prospectus shall prescribe the validity period of the prospectus and it should be not be exceeding one year. This period commences from the opening date of the first offer of the securities. For any second or further offer, no separate prospectus is required.

    While filing for a shelf prospectus, a company is required to file an information memorandum along with it.

    Information Memorandum [Section 31(2)]

    The company which is filing a shelf prospectus is required to file the information memorandum. It should contain all the facts regarding the new charges created, what changes have undergone in the financial position of the company since the first offer of the security or between the two offers.

    It should be filed with the registrar within three months before the issue of the second or subsequent offer made under the shelf prospectus as given under

    When any company or a person has received an application for the allotment of securities with advance payment of subscription before any changes have been made, then he must be informed about the changes. If he desires to withdraw the application within 15 days then the money must be refunded to them.

    After the information memorandum has been filed, if any offer or securities is made, the memorandum along with the shelf prospectus is considered as a prospectus.

    Red herring prospectus

    Red herring prospectus is the prospectus which lacks the complete particulars about the quantum of the price of the securities. A company may issue a red herring prospectus prior to the issue of prospectus when it is proposing to make an offer of securities.

    This type of prospectus needs to be filed with the registrar at least three days prior to the opening of the subscription list or the offer. The obligations carried by a red herring prospectus are same as a prospectus. If there is any variation between a red herring prospectus and a prospectus then it should be highlighted in the prospectus as variations.

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