Certain information must be in a prospectus before the IPO work begins.
Taking a company public by listing on the stock exchange can be one of the most rewarding and exhausting experiences of your entrepreneurial life. Getting the details with regards to what must be in a prospectus is a big step in beginning the process. The law that governs what must be in the prospectus is the Securities Act of 1933, which details 27 requirements for what a company must include in the listing document.
General Information on the Company
The first seven requirements mainly involve the name that the company will be doing business as, the business address and the names and the addresses of the directors and key executives. Additionally, the names and addresses of the underwriters will need to be listed.
The requirements also include listing names and addresses of all persons who own more than 10 percent of the outstanding shares and how many shares the directors and key executives own.
Information on the Company Itself
The next five requirements mainly focus on the company including a description of what the business does, information on the company's capitalization, whether there are any outstanding options and the amount of capital stock of each class of shares. In addition, how much debt the company has and when the debt will mature is needed.
Use of Funds
The prospectus must also have in detail what the funds will be used for and the salaries of key executives. The document must also detail how much the company expects to raise from the issue, price of the issue and all commissions as it relates to the issue to be paid to the underwriters along with any other expenses that relate to the issue. The prospectus must also state how much was paid if a promoter of the issue was hired at least two years before the issue. If any of the funds will be used to purchase an asset, the name and address of the seller also has to be included.
Additional Requirements
The prospectus must also include if the company has bought from any key personnel or shareholder property in the past two years. The document must also list the names and addresses of the lawyers that have reviewed and approved the issue of the security, details of all recent material contracts, balance sheet, as well as a profit and loss statement. Additionally, if the company will be using the funds raised to purchase a business, the prospectus must also include a certified copy of the acquisition's profit and loss statement.
