IPO of a company and prospectus

Once a company is registered, it needs to take off. This is known as a company’s IPO. It is true that after registration, a company comes into existence and can do business immediately. But a start-up company often needs to get enough capital to get off the ground. The organizers there have to take the necessary steps to get started. Founders there must take the necessary steps to raise working capital to successfully launch the business.

If there is an existing company in the form of a sole proprietorship or partnership that is taken over by the new company, the capital of the former company becomes part of the capital to launch the new company. There is also a capital transfer where one company takes over another.

There are several ways to market or raise capital for a business. The method is usually influenced by the type of business: whether private or public.

Private companies typically rely on equity contributions from their shareholders, although new shares can be issued for cash.

Capital can also be raised through debentures, loans and overdrafts. It could also be taken public through private placement. On the other hand, public companies can be funded through equity contributions, debt obligations, loans and overdrafts, and private placements. But additionally, it could invite the public to buy shares and buy its debt securities by listing it on the stock exchange or the capital market.


A public company invites the public to subscribe to its stocks and debentures by issuing a prospectus. Section 48 of the Investments and Securities Act (ISA) provides that it is not lawful to file any securities application form in a public company unless the form is filed with a prospectus of the company.

A prospectus is any notice, circular, advertisement or other invitation to the public to subscribe for or purchase stock or debt securities of a company.

The ISA provides in Section 57(1) that no prospectus may be issued by or on behalf of any company or relating to any proposed company unless a copy has been filed with the Securities and Exchange on or before the date of its issuance delivered commission for registration.


Pursuant to Section 50(1) of the Investment and Securities Act, any prospectus issued by or on behalf of a company must contain:

– The number of founders or management or follower shares (if any).

– Directors’ qualification percentages (if any) and directors’ remuneration as provided for in the Articles of Incorporation.

– names, addresses and descriptions of directors or proposed directors;

– The Minimum Subscription, which is the amount which the Directors consider must be raised through the issue in order to provide funds for the following matters.

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

b) Any upfront costs and subscription commissions to be borne by the company.

c) repayment of monies borrowed from the Company in respect of a and b above

d) The amount to be provided in relation to the matters referred to in (iv), other than from the proceeds of the issuance, and the sources of such amounts.

– The timing of the opening of the subscription lists.

– The amount payable for each Share at application and allotment.

– Details of stocks and bonds not issued for cash

– Details of stock or bond options

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

– Amount paid for real estate detailing the amount paid for goodwill.

– Date, parties and general nature of all significant contracts.

– Names and addresses of the company’s auditors.

– Directors’ participation in the property to be acquired by the company.

– Preliminary costs, commissions and brokerage fees.

Remuneration of the organizer.


If a prospectus contains an expert opinion before it is published, two conditions must be met:

1. He must have given his consent and not withdraw his consent in writing to the issue, enclosing his declaration, before a copy of the prospectus has been served on registration;

2. A declaration of consent must be included in the prospectus.


Because potential investors in the company know little or nothing about the company, the content of a prospectus must contain material facts that would enable the investing public to properly appreciate the company’s true purpose and position. Consequently, the prospectus must not contain false or misleading statements or information. The Company and those responsible for issuing a prospectus that contains false information may be subject to civil or criminal penalties on the part of the subscriber.


This applies to both common law and CAMA 2004; And you are:

1. Claim of the injured participant for damages due to fraud according to § 562, he can demand damages.

2. Action for annulment of the allocation contract (section 571).

In order to make a claim for damages and/or rescission under the common law, such subscribers must demonstrate:

a) that the misrepresentation is a material statement of fact;

b) that he was deceived into subscribing for the shares;

c) that the misrepresentation was fraudulent and made by a person acting on behalf of the Company;

d) that he has suffered damage or damage as a result. Under the CAMA, in order to be successful, the aggrieved applicant must prove that the prospectus contained a false statement on which it relied and suffered damage as a result.


Under Section 563, any officer of the company who authorizes the issue of a prospectus or statement in lieu of the prospectus that contains false information is guilty of a criminal offense and shall be liable, upon arraignment, to imprisonment not exceeding 2 years or a fine which does not exceed N5,000 or both; or summary conviction to 3 months imprisonment or a fine of N500 or both.