The definition given by Section 43(2) of the companies Act 1963 of a prospectus is “any prospectus, notice, circular, advertisement or other invitation, offering to the public for subscription or purchase any share or debentures of a company.” Ussher observes that the primary objective of the initiave is shareholder protection and the “chief weapon” available to the authorities in ensuring this is the compulsory disclosure of material facts upon the occasion of any invitation to member of the public to subscribe for shares of debentures in a company. This as noted by Cahill in Corporate Finance Law, is known as an offer to the public.
Traditionally judiciary looked to Section 61 of the 1963 Act for guidance as to what constituted an offer to the public. However, Eaton in “Implementing the Prospectus Directive” observes that this was more helpful in providing that certain offers were not “offers to the public.” Similarly, Cahill comments that it does not succeed in providing an all embracing definition that lends itself to easy elucidation.
OFFER TO THE PUBLIC
Warrington J attempted to analyse the concept of an offer to the public in Sherwell v Combined Incandescent Mantles Syndicate where he stated that an offer was one “to anyone who should choose to come in.” The court held that there had been no offer to the public as the 200 circulated prospectuses had been distributed to friends and family. The intent of this was to keep the share capital in the company to themselves and friends whom they would like to have as members of the company.
In the case of Corporate Affairs Commission V David James Finance Ltd an invitation to 12,500 company employees was also held not to amount to an offer to the public or a section of the public. However, in Re South of England Natural Gas and Petroleum Company Ltd a document circulated to 2000 members of certain gas companies was held to constitute an offer to the public. Swifin Early took the view that merely because...
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