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Why a Prospectus is Essential for Raising Capital

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If a public company wants to raise capital through shares in the country, it must adhere to the Australian Securities and Investments Commission (AISIC) requirements. The company is required to provide a disclosure document, such as a prospectus. However, the Corporations Act, 2001 exempts other offerings from disclosure. No venture capitalist or investor will take your company seriously if you do not have a prospectus written by qualified professionals, such as accountants. This article takes a deep dive into writing a prospectus to raise capital for a business entity.

What is a Prospectus? 

A prospectus is a disclosure document that a company uses to woo investors to raise capital in stock or shares. Also, a prospectus is used to state the terms of notes or bonds during debt offering. The document outlines the terms of offering securities and rules of the offer. Therefore, it is a crucial document that shows investors what your company has to offer so that they can invest in it. A prospectus is prepared by a team of professionals, consisting of accountants and lawyers.

Due Diligence

Before lodging a prospectus with the ASIC, it is standard industry practice for a company to conduct due diligence on the document. A firm should investigate essential areas of its business before signing off on a prospectus. A certified accountant can analyse it to ensure that the content of the prospectus meets legal requirements. Due diligence ensures that the information in a prospectus coherently and correctly describes your company to would-be investors. Besides, it helps potentially liable parties to depend on due diligence defences in Australian law. Note that your company can be held liable for providing misleading information in a prospectus without reasonable grounds under the Corporations Act. The company, its directors, and underwriters could face civil and criminal charges if a prospectus contains misleading information.

Contents of a Prospectus 

Although the Corporations Act does not stipulate a checklist for the content of a prospectus, your accounting advisor can help you establish vital information that should be contained in the document. Ideally, the document should have all the necessary information needed by prospective investors and their financial advisors. A prospectus must contain a company's assets and liabilities, coupled with financial statements, such as profit and loss reports, balances sheet, and revenue. Similarly, you must incorporate the liabilities and rights of the securities that you are offering.

For more information about creating a prospectus or other accounting services, contact a local accounting office.