Once a business has been registered, it has to get off the ground. This is described as floating a company. It is true that a company comes into existence once it is registered and can immediately do business. But a newly formed company often needs to raise enough capital to get off the ground. The promoters there have to take the necessary steps to get off the ground. There the promoters must carry out the necessary steps to obtain working capital for the successful takeoff of the company.

When there is an existing business in the form of a single business or a partnership, which is absorbed by the new company, the capital of the previous business becomes part of the capital to float the new company. Similarly, there is the transfer of capital when one company takes over another.

There are several ways to float or increase the capital of a company. The method is often affected by the type of company: either private or public.

Private companies generally rely on capital contributions from their shareholders, although new shares can be issued in exchange for cash.

In addition, capital can be obtained through debentures, loans, and overdrafts. It could also be floated by private placement. On the other hand, public companies can be financed at takeoff through capital contributions, debentures, loans and overdrafts, and private placement. But additionally, it could invite the public to buy shares and acquire its debentures through their listing on the stock or capital market.

USER INFORMATION

A public company invites the public to subscribe for its shares and debentures by issuing a prospectus. Section 48 of the Securities and Investments Act (ISA) provides that it shall not be lawful to issue any form of application 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 offer of invitation to the public for the subscription or purchase of shares or debentures of a company.

The ISA, in its section 57(1), provides that no prospectus shall be issued by or on behalf of a company or in relation to an intended company unless, on or before the date of its publication, it has been delivered a copy to Securities and Exchange. Commission for registration.

CONTENT OF A BROCHURE

Under section 50(1) of the Securities and Investments Act, each prospectus issued by or on behalf of a company must state:

– The number of founders or administrators or deferred shares (if any).

– The qualification actions of the directors (if any) and the remuneration of the directors in accordance with the provisions of 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 administrators, must be raised through the issuance to endow the sums of the following concepts.

(a) The price of any purchased property to be paid for with the proceeds of the issuance;

b) The preliminary expenses and the insurance commission in charge of the company.

c) Repayment of any money lent by the company in view of a and b above

(d) The amount that will be provided with respect to the matters established in (iv) that do not come from the proceeds of the emissions and the sources of said amounts.

– The moment of the opening of the subscription lists.

– The amount to be paid in the application and award of each share.

– Details of shares and debentures issued other than in cash

– Details of stock options or debentures

– Data of the sellers of the properties sold to the company.

– Amount paid for real estate, stating the amount paid for goodwill.

– Date, parts and general nature of all material contracts.

– Names and addresses of the company’s auditors.

– Interest of the directors in the property that the company intends to acquire.

– Preliminary expenses, commission and brokerage.

Remuneration of promoters.

EXPERT STATEMENT IN A BROCHURE

When a prospectus includes a statement made by an expert prior to publication, 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 registration prospectus, have withdrawn your consent in writing to the issuance including your declaration;

2. The brochure must contain a statement that you have given your consent.

LIABILITY WITH RESPECT TO THE PROSPECTUS.

Since potential investors in the company know little or nothing about the company, the content of a prospectus must include material facts that enable the investing public to make a correct assessment of the true purpose and position of the company. Accordingly, the prospectus must not contain false or misleading statements or information. The company and those responsible for the issuance of a prospectus that contains incorrect actions of the subscriber can be civil or criminal.

CIVIL RESOURCES.

This is both under common law and under CAMA 2004; and they are:

1. The action of the aggrieved subscriber in compensation for damages provided for in article 562, may demand compensation.

2. Action for termination of the award contract (art. 571).

To be successful in a claim for damages and/or recession under common law, such underwriters must prove:

a) That the impropriety is a material manifestation of the facts;

b) That he was induced by the false declaration to subscribe the shares;

(c) That the misrepresentation was fraudulent and was made by a person acting on behalf of the company;

d) That it has suffered loss or damage as a result. According to CAMA, to be successful, the aggrieved subscriber must prove that the prospectus contained a misstatement on which it was relied and therefore suffered a loss.

CRIMINAL PROCEEDINGS

Under section 563, any company officer who authorizes the issuance of a prospectus, or statement in lieu of a prospectus, containing false statements shall be guilty of an offense and may be sentenced to imprisonment for a term not to exceed 2 years or a fine not exceeding N5,000 or both; or summary conviction to a term of 3 months or a fine of N500 or both.