Once a business has been registered, it has to take off. This is described as a float of a company. It is true that a company is born once registered and can do business immediately. But a newly formed company often needs to raise enough capital to get off the ground. Promoters have to take the necessary steps to get off the ground. The promoters have to take the necessary steps to obtain working capital for the successful take-off of the business.
When an existing business exists in the form that can be a sole business or a partnership, which is assumed by the new company, the capital of the previous business becomes part of the capital to put the new company into circulation. Similarly, there is a capital transfer when one company takes over another.
There are several ways to float or raise capital for a business. The method is usually affected by the type of company: either private or public.
Private companies generally depend on capital contributions from their shareholders, although new shares can be issued for cash.
In addition, capital can be raised through bonds, loans, and overdrafts. It could also float through private placement. On the other hand, public companies can be financed to take off through capital contributions, debentures, loans and overdrafts, and private placements. But in addition, it could invite the public to buy shares and its obligations by listing on the stock market or on the capital market.
USER INFORMATION
A public company invites the public to subscribe for its shares and obligations by issuing a prospectus. Section 48 of the Investments and Securities Act (ISA) establishes that it will not be lawful to issue any application form for securities in a public company unless the form is issued with a prospectus of the company.
A prospectus is any notice, circular, announcement or other invitation that is offered to the public for the subscription or purchase of shares or obligations of a company.
The ISA by section 57 (1) establishes that no prospectus will be issued by or on behalf of a company or in relation to a recipient company unless, on or before the date of its publication, a copy has been delivered to the Exchange. of Securities. Commission for registration.
CONTENT OF A BROCHURE
According to section 50 (1) of the Investments and Securities Act, any prospectus issued by or on behalf of a company must indicate:
– The number of founders or managerial or deferred shares (if any).
– Directors ‘qualification actions (if applicable) and directors’ remuneration as provided for in the bylaws.
– Names, addresses and descriptions of the directors or proposed directors;
– The minimum subscription, which is the amount that, in the opinion of the directors, must be increased through the issue in order to provide amounts for the following matters.
a) The price of any property purchased to be paid with the proceeds of the issue;
b) The preliminary expenses and the subscription commission in charge of the company.
c) Refund of any money loaned by the company in view of a and b above
d) The amount to be provided with respect to the matters indicated in (iv) that do not come from the product of the emissions and the sources of said amounts.
– The moment of the opening of the subscription lists.
– The amount payable upon request and award of each share.
– Details of shares and obligations issued other than in cash
– Details of options on shares or obligations
– Data of the sellers of properties sold to the company.
– Amount paid for the property, indicating the amount paid for goodwill.
– Date, parts and general nature of each material contract.
– Names and addresses of the company’s auditors.
– Interest of the directors in the property that the company proposes to acquire.
– Drafts, commission and brokerage.
Remuneration of promoters.
EXPERT STATEMENT IN A BROCHURE
When a prospectus includes a statement made by an expert prior to issuance, two conditions must be met:
1. You must have given your consent and you must not, prior to the delivery of a copy of the prospectus for registration, have withdrawn your consent in writing to the issuance with your statement included;
2. The prospectus must include a statement that you have given your consent.
RESPONSIBILITY REGARDING THE BROCHURE.
Since potential investors in the company know little or nothing about the company, the content of a prospectus should include material facts that allow the investing public to make a correct assessment of the true purpose and position of the company. Accordingly, the brochure must not contain false or misleading statements or information. The company and those responsible for the issuance of a prospectus that contains errors in the action of the subscriber can be civil or criminal.
CIVIL REMEDIES.
This is both under customary law and in CAMA 2004; and they are:
1. Action by the aggrieved subscriber in damages for fraud under section 562, can sue for compensation.
2. Recession action of the award contract (article 571).
To be successful in a common law damage and / or recession claim, such underwriters must prove:
a) That the inaccuracies constitute a statement of material facts;
b) That he was induced by the misrepresentation to subscribe for the shares;
c) That the misrepresentation was fraudulent and that it was carried out by a person acting on behalf of the company;
d) That he suffered loss or damage as a result. According to CAMA, to be successful, the aggrieved underwriter must prove that the prospect contained a misstatement on which it relied and therefore suffered losses.
CRIMINAL PROCEDURES
According to section 563, any company official who authorizes the issuance of a prospectus, or a statement in lieu of a prospectus, containing false statements, will be guilty of a crime and will be liable, if convicted, to imprisonment. for a period not exceeding 2 years or a fine not exceeding N5,000 or both; or summary sentence to a term of 3 months or a fine of N500 or both.
