Flotation of a company and a prospectus

Once a company is registered, it must take off. This is described as the flotation of a company. It is true that a business is created once it is registered and can immediately do business. But a newly created company often needs enough capital to take off. Promoters must take the necessary steps to take off. Promoters must take the necessary measures to obtain working capital necessary for the successful start of the business.

When there is an existing business in the form of a single business or a partnership that is taken over by the new corporation, the capital of the old business becomes a part of the capital allowing the new company to float. Similarly, there is capital transfer when one company takes another.

There are different ways to float or raise money for a business. The method usually depends on the type of business: private or public.

Private companies generally depend on share contributions from their shareholders, although new shares may be issued against money.

In addition, the capital may be raised through debentures, loans and overdrafts. It could also be launched by private placement. On the other hand, public companies can be financed to take flight through capital contributions, debentures, loans and overdrafts and private placements. But in addition, it could invite the public to buy shares and buy its debentures by being listed on the stock market or the capital market.


A public company invites the public to subscribe for its shares and debentures through the publication of a prospectus. Article 48 of the Securities and Investments Act (ISA) states that it is not lawful to issue an application for registration of securities in an open company unless the form is accompanied by a prospectus of the company.

A prospectus is a notice, circular, advertisement or other public invitation intended for the subscription or purchase of shares or debentures of a corporation.

Subsection 57 (1) of the ISA provides that no prospectus shall be published by a corporation or on behalf of a future corporation unless, on or before the date of its publication, a copy has been delivered to the Securities and Exchange Registration Commission.


Pursuant to subsection 50 (1) of the Investment and Securities Act, any prospectus issued by or on behalf of a corporation must state

- the number of founders, executives or deferred shares (if any).

- Director qualification shares (if any) and director compensation, in accordance with the Articles of Incorporation.

- names, addresses and descriptions of the directors or directors proposed;

- The minimum subscription, which is the amount that, in the opinion of the directors, must be obtained via the issue in order to provide sums for the following areas.

(a) The price of any property purchased to be paid from the proceeds of the issue;

b) All preliminary expenses and subscription commission charged to the company.

(c) Reimbursement of any amount borrowed by the company under paragraphs (a) and (b) above

(d) The amount to be provided under the matters referred to in (iv) other than the proceeds of the issues and the source of those amounts.

- the time of opening of the subscription lists.

- The amount payable to the application and the allocation on each share.

- Details of shares and debentures issued other than for cash

- Details of stock options or unsecured obligations

- Details of the sellers of properties sold to the company.

- Amount paid for the property, showing the amount paid for the goodwill.

- Date, parties and general nature of any major contract.

- Names and addresses of the auditors of the company.

- Directors' interest in the property that the company proposes to acquire.

- Preliminary expenses, commission and brokerage.

Remuneration of the promoters.


When a prospectus includes a statement made by an expert before its publication, two conditions must be met:

1. He must have given his consent and shall not, prior to the delivery of a copy of the registration prospectus, withdraw his written consent to the issue with his enclosed statement;

2. A statement that he has given his consent must be included in the prospectus.


Since potential investors in the company know little or nothing about the company, the content of a prospectus must include material elements that allow the investing public to form a correct idea of ​​the purpose and situation of the company. . Therefore, the prospectus must not contain any false or misleading statements or information. The company and those responsible for issuing a prospectus containing anomalies in the action of the subscriber may be civil or criminal.


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

1. In the case of fraud for fraud under Article 562, the aggrieved subscriber may bring an action for damages.

2. Recourse in recession of the subdivision contract (section 571).

To succeed in damages and / or recession at common law, these subscribers must prove:

(a) the inaccuracies constitute an important factual statement;

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

(c) that the misrepresentation was fraudulent and that it was committed by a person acting on behalf of the company;

d) That he has suffered a loss or damage. Under CAMA, in order to succeed, the aggrieved subscriber must prove that the prospectus contained an anomaly on which it was based and that he was therefore suffering a loss.


Under section 563, any officer of the company who authorizes the publication of a prospectus or statement in lieu of prospectus that contains inaccurate statements is guilty of an offense and liable, in the case of conviction on conviction, imprisonment for a term not exceeding 2 years or a fine not exceeding N5,000 or both; or a summary conviction of 3 months or a fine of N500 or both.