Once a company has been registered, it should start. This is described as a transfer of a company. It is true that a company occurs when it is registered and it can act immediately. But a newly formed company often has to get enough capital to start. The promoters who need to take the necessary steps to get started. The promoters who need to take the necessary steps to get working capital for a successful start of the business.
When there is an existing business in the form of a single business or partnership that is taken over by the new company, the capital of the former company becomes part of the capital to flow the new company. Similarly, a transfer of capital takes place where one company acquires another.
There are various ways to flow or raise capital for a company. The method is usually influenced by the type of business: either private or public.
Private companies usually rely on equity contributions from their shareholders, although new shares can be issued for cash.
Capital can also be raised through bonds, loans and overdrafts. It can also be floated by private placement. On the other hand, public companies can be financed for start-ups through equity contributions, bonds, loans and overdrafts and private placement. But in addition, it could encourage the public to buy shares and buy its bonds by being listed on the stock or capital markets.
A public company encourages the public to subscribe for its shares and bonds through the issuance of a prospectus. Section 48 of the Investment and Securities Act (I.S.A.) provides that it is not legal to issue any securities application in a public company unless the form is issued with the company’s prospectus.
A prospectus is any announcement, circular, advertisement or other invitation offered to the public for the subscription or purchase of a company’s shares or bonds.
ISA by section 57 (2). Paragraph 1 provides that no prospectus may be issued by or on behalf of a company or in relation to an intended company, unless a copy has been provided to the Securities and Exchange Commission for registration on or before the date of its publication.
CONTENTS IN A PROSPECTUS
Pursuant to section 50 (1). 1 of the Investment and Securities Act, each prospectus issued by or on behalf of a company must state:
– The number of founders or management or deferred shares (if any).
– Board of Directors qualification shares (if any) and remuneration to the directors as described in the articles.
– the names, addresses and descriptions of the directors or proposed directors;
– The minimum subscription, which is the amount that, in the opinion of the Board of Directors, must be raised through the issue to give the amount for the following conditions.
(a) the price of all purchased properties payable for the proceeds of the issue;
b) Any preliminary expenses and insurance commission payable by the company.
(c) Repayment of any money borrowed by the Company in consideration of a and b above
(d) the amount to be made available for the conditions specified in (iv), other than the proceeds from the emissions and sources of such amounts.
– The time of opening the subscription lists.
– The amount payable upon application and allotment of each share.
– Information on shares and bonds issued other than for cash
– Information about options on shares or bonds
– Information about sellers of properties sold to the company.
– Amount paid for property with stated amount of goodwill.
– Date, parties and general nature of any material contract.
– The names and addresses of the company’s auditors.
– Board interest in the property proposed to be taken over by the company.
– Preliminary expenditure, commission and mediation.
EXPERT STATEMENT IN A PROSPECTUS
If a prospectus includes a statement from an expert before issuing it, two conditions must be met:
1. He must have given his consent and must not, before supplying a copy of the prospectus for registration, have withdrawn his written consent to the subject with his statement;
2. A statement that he has given his consent must contain the prospectus.
RESPONSIBILITY FOR PROSPECTUS.
As potential investors in the company know little or nothing about the company, the contents of a prospectus should include essential facts that would allow the investing public to properly assess the real purpose and position of the company. Accordingly, the prospectus must not contain false or misleading statements or information. The company and the persons responsible for issuing a prospectus containing misinformation when the subscriber’s action is possibly civil or criminal.
This is both under the Common Law and CAMA 2004; and they are:
1. Action by the aggrieved subscriber in compensation for fraud under section 562, he may sue for damages.
2. Measures for recession of the award contract (section 571).
In order to succeed with a claim for damages and / or recession under the general law, such subscribers must prove:
a) That the misstatements are an essential statement of facts;
b) That he was induced by the erroneous representation to subscribe for the shares;
(c) that misrepresentation was fraudulent and that it was made by a person acting on behalf of the company;
d) That he suffered loss or injury thereby. In order to be successful, CAMA under CAMA must prove that the prospectus contained a misstatement which he relied upon and thus suffered loss.
Under section 563, any officer of the company who authorizes the issuance of a prospectus, or a statement in lieu of a prospectus containing untrue statements, is guilty of an offense and is liable for sentencing following a prison sentence for a period that not exceeding 2 years or fine not exceeding N5,000 or both; or summary judgment to a term of 3 months or a fine of N500 or both.