Golden Rule of Prospectus has a meaning and a moral in it, which says whatever
information comes from the company to the public, through the medium of
prospectus, must be true, fair and accurate.
company issues prospectus to attract general public to purchase its shares, interested
people rely on the information presented in the prospectus and on the basis of
which they desire to make investment in the shares of the issuing
As such various financial, operational and other important information
in the prospect needs to be true in its strict sense.
addition to the responsibility of the company for presenting true facts in the
prospectus, it is also expected from the company to not to miss out or omit any important facts.
The person presenting the
information in the prospectus on behalf of the company must be honest enough to
present facts only and no more or no lesser exaggerations.
This 'Golden Rule' for framing of aprospectus was laid down by Justice Kindersely in New Brunswick & Canada Rly.