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Golden Rules of Framing Prospectus in Company Law

The Golden Rule in 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.

A company issues a prospectus to attract the general public to purchase its shares. Interested people rely on the information presented in the prospectus and on the basis of which they desire and take further steps to make an investment in the shares of the issuing company.

As such various financial, operational and other important information in the prospectus needs to be true in a strict sense.




Additionally, it is also expected from the company to not to miss out or omit any important facts that are required to be presented in the prospectus. All endeavors must be made to disclose all the essential information in the prospectus as may be necessary.

The person(s) presenting the information in the prospectus on behalf of the company must be honest enough to present facts only with no more or no less exaggerations.


The 'Golden Rule' for framing of a prospectus was laid down by Justice Kindersley in New Brunswick and Canada Railway and Land Co. v. Muggeridge (1860). Sir Richard Torin Kindersley (1792–1879) was a lawyer and judge. He was born at Madras, India.



Comments

  1. Vimlesh Gounder29 June, 2018

    I was wondering what the Golden rule of prospectus means..now I know it. Thanks for sharing the information briefly!

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