Tbe following is the distinction between the two important instruments of a company
the prospective im esters be misled, there are a large rmmber of statutory provisions, aimed at their protection. relating to the form and contents of a prospectus. If a COmpaDy needs more funds for expansion in future, a prospectus may also be issued at a later stage.
The meaning of the phrase "offer to the pultlic'. is an important condition in tl:e above definition which determines whether a document is a prospectus or not. It is difficult to say exactly how many persons constitute 'tlte public." Am- number from two to infimty perhaps even one, may serve to indicate public. Section 67 clarifies the position and states that 'public' includes any section of the public, however selected. For example, if a document inviting persons to buy shares is issued, to all teachers, or to all students of commerce, or to act the clients of a particular sharebroker or to ail the shareholders of a compaconcerned, it is still issued to
the public" and therefore is a prospectus it follows from this that even if there were only one person in the particular section of the public selected, he alone shall consLitiiie public. Sub-section 3, however linits the effect of this Section by stating that: (a) if the offer can be accepted only by persons to whom it is made, die offer is not one made to the public; or Ih) if the offer is made to a few friends of the directors or if it is the domestic concern of those ma and receivhig the offer, the offer is not made to the public.
what cornstitnte an - -offer to the public,'- is not the number of persons to view the offer for sale is made, but the nature of offer so made If the offer makes the shares and debentures available for subscription by persons other ihan moss receiving the offer, it is deemed to have been made to the "pubhc s On the other hand, if the offer can be accepted only by those to whom it is made or if it is made only to the friends or relatives of directors, it is not one made to the public And so in Re South of England Natural Gas and Petroleum Co Ltd
A prospectus marked 'for private circulation only' was issued by the promoter of a Gas Co on its behalf only to shareholders in various other Gas Companies likely to be interested in the projected company amd 3,000 copies were so sent out. It was held that though the offer was only to limited class, it was nevertheless an "offer to the public" because persons other than those receiving the offer could also accept it.
The meaning of the world "subscription or purchase." The world subscription in the definition means ta the shares for cash: Hence a circular by a company offering the new shares to the shareholders of two existing companies in exchange for their shares in these companies was not an offer for subscription within the definition (Governmenf Stoaklnve.itment Co Ltd vs. Christopher). Therefore, the document ma the offer could not be celled a prospectus within the meaning of the term in Section 2(36).
ISSUE OF PROSPECTUS
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