1. CAPITAL MARKETS DEVELOPMENT AUTHORITY Prospectus Preparation
Sherani & Co
Barristers & Solicitors
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2. 1. Modes of doing Business
As a sole proprietor
As a partnership
As a company registered under the Companies Act.
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3. 2. Types of Companies There are 4 types of Companies :-
Company limited by shares
Company limited by guarantee and not having a share capital
Company limited by guarantee and having a share capital
Unlimited Company
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4. 3. Private Company
The Companies are then further divided into private and public companies. All companies which are not private are public. Private Company is defined to mean a company which by its articles:-
(i)  restricts the right to transfer shares
(ii)  limits the number of its members to fifty
(iii) prohibits any invitation to the public for any shares or debentures of the company.
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5. 4. Public Company
The greatest advantage that a public company has is that it can go to the public to raise capital by a public float of its shares and /or debentures.
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6. 5. Capital Markets Development Authority statutory functions:-
To advise the Minister on all matters relating capital markets
To approve an entity as securities exchange
To grant licences to brokers etc
To inquire into any public company
To suspend or cancel the listing of any securities
To take measures to safeguard the persons dealing in securities
To suppress illegal and improper practices
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7. 6. Requirement of Prospectus
Provides protection to investors
Initially of prospectus was dealt with under Part III of the Companies Act
CMDA Act has supplementary provisions
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8. 7. Prospectus under CMDA Act
S.48 - Authority scrutinises proposals
S.49 - Prospectus in writing and to contain all necessary information
S.50 - Expert’s statement with consent
S.51 - All certificates and documents to be attached. Prospectus to be signed issuer, all directors of the issuer and the promoter
S.52 - Registrar refuses registration if prospectus false etc.
S.54 - Authority may suspend or cancel prospectus if found to be false
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9. 8. Form and Content of Prospectus
S. 42 (1) of the Companies Act previously governed from and content
Matters contained in Part 1 of the fourth schedule and reports specified in Part II
S. 42 (3) of the Act - prospectus only necessary where offer public.
The Capital Market Development Authority (Securities Issues) Regulations l999
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10. 9. Prospectus – First Schedule
Clause 1 - main terms of the offer
2 - details of incorporation
3 - Principal Subsidiaries
4 - Directors and advisers
5 - restrictions on director’s powers
6 – substantial shareholders of issuer
7 – activities of issuing group
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11. First Schedule - continued
8 - Summary of Financial Statements
9 - Prospects and Forecasts
10 - Initial Flotations
11 - Acquisition of business or subsidiary
12 - Securities paid otherwise than cash
13 - Options to subscribe
14 - Appointment + retirement of directors
15 - Directors’ interests
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12. First Schedule - continued
16 - Promoters’ interests
17 - Material Contracts
19 - Preliminary and issue expenses
20 - Restrictions on issuing group
21 - Other terms of offer and securities
22 - Requirements in respect of financials
23 - Places of inspection of documents
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13. First Schedule - continued
24 - Other material matters
25 - Directors statement
26 - Auditor’s report
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14. 10. Civil Liability for mis-statement in Prospectus
Liability under the Companies Act (s.47)
Liability at Common Law
Liability under the Fair Trading Act.  
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15. Civil Liability for mis-statement in Prospectus - cases
Houldsworth v City of Glasgow Bank
Potts v Miller
Derry v Peek
Hedley Byrne & Co Ltd v Heller & Partners Ltd
Shaddock [L] & Associates Pty Ltd & Anor v Parramatta City Council
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16. 11. Criminal Liability for mis- statements and Prospectus
S. 42 (4) of Companies Act provides a fine not exceeding $1, if no proper prospectus issued.
S.44 (2) – fine if consent of expert not obtained.
S.48 (1) – deals with untrue statements in prospectus
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17. 12. Remedies
Damages
Recission
Injunction
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