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CAPITAL MARKETS DEVELOPMENT AUTHORITY Prospectus Preparation

Learn about the various modes of doing business, types of companies, and the requirements for prospectus preparation under the Capital Markets Development Authority. Understand the civil and criminal liabilities for mis-statements in a prospectus and the available remedies.

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CAPITAL MARKETS DEVELOPMENT AUTHORITY Prospectus Preparation

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  1. CAPITAL MARKETS DEVELOPMENT AUTHORITYProspectus Preparation Sherani & Co Barristers & Solicitors

  2. 1. Modes of doing Business • As a sole proprietor • As a partnership • As a company registered under the Companies Act.

  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

  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. Text Text Text Text Text Text Text Text Text

  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.

  6. 5. Capital Markets Development Authoritystatutory functions:- • To advise the Minister on all matters relating capital markets • To approve an entity as securities exchange • To grant licences to brokersetc • 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

  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

  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

  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

  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

  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

  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

  13. First Schedule - continued • 24 - Other material matters • 25 - Directors statement • 26 - Auditor’s report

  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.  

  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

  16. 11. Criminal Liability for mis-statements and Prospectus • S. 42 (4) of Companies Act provides a fine not exceeding $1,000.00 if no proper prospectus issued. • S.44 (2) – fine if consent of expert not obtained. • S.48 (1) – deals with untrue statements in prospectus

  17. 12. Remedies • Damages • Recission • Injunction

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