Only a public company can issue a prospectus to invite the public to subscribe for its securities (shares and debentures).
A prospectus is a crucial document that a public company uses to provide potential investors with detailed information about its securities offering. This document allows investors to make informed decisions about whether to invest in the company.
Here's a breakdown:
- Public Companies: These companies are allowed to offer their shares and debentures to the general public. Therefore, they are the only entities legally authorized to issue a prospectus.
- Private Companies: Private companies are restricted from offering their shares to the public. Consequently, they cannot issue a prospectus. They raise capital through private placements.
In essence, the ability to issue a prospectus is directly linked to the right to solicit investments from the general public. Since private companies lack this right, they cannot issue a prospectus.
