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Definition of Prospectus

A prospectus is a legal document that is required by every company and is to be filed with the Securities and Exchange Commission to provide with the details of investments that are being offered to the public for sale. A prospectus should contain all the necessary facts and figures relating to the investments that would be useful for the investor to make the necessary investment related decisions while making purchase of these investments. The prospectus is also called “Offer Document”.

There are two types of prospectuses for investments and bonds - Preliminary prospectus and final prospectus. The prospectus would include the details of the objectives, strategies, expenses and other fees and management details of the investments.

Essentials of a Prospectus

A prospectus should include the following details:

  • There must be an request submission to the unrestricted public.
  • The request must be made on behalf of the company or future company.
  • The request must to be pledged or purchase.
  • The request must relate to shares or debentures.

Contents of a Prospectus

The following are the contents of a Prospectus:

  • The name and full address of the company that is offering the investments.
  • All the necessary details of the signatories of the company.
  • The number of shares that are being offered to the pubic.
  • The interest of shareholders and the profits of the company.
  • The full details, like the name, address and profession of the Board of Directors of the company.
  • Minimum subscription details of the company.
  • Details of property acquired for business by the company.
  • The time and date when the subscription list would be opened.
  • The amount that is payable to the shareholders on application, allotment and calls.
  • Name and address of the company auditors.
  • Amount of opening expenses.

These are some of the necessary details that must be included in the prospectus so that the future shareholders would have the necessary information regarding future investments he is about to make in the company. The prospectus serves as an advertisement of the company so the details that are given should be authentic and genuine. 

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