an often lengthy document in which the issuer provides written disclosures. By disclosing all relevant information the issuer not only informs the prospective purchaser about the investment opportunity but also produces a record of all information disseminated to the public in connection with the issue that may become relevant if in the future disputes arise between the company and a dissatisfied investor. A prospectus must contain all material information that may assist potential investors to make an informed decision about whether or not to invest in the issuing company. Unlike the purchase of a tangible asset such as a house or a car (which a potential buyer can physically inspect), a security is an intangible asset the value of which depends on the performance of the company concerned and the assessment by the market of its prospects. It is with this in mind that securities laws require the issuer to inform prospective investors of all material information about the company to allow
them to make an informed investment decision with full knowledge of all material issues relating to the value of the security and the risks present. Preparation of the prospectus is perhaps the most important aspect of conducting a proper securities offering. Without doubt it demands a substantial commitment on the part of the company’s management to provide the requisite information for inclusion in the prospectus within the timeframes set by the CMA. However, the prospectus is ultimately the key marketing document that will attract shareholders to invest funds in the business and it may also become the main reference document to defend against potential litigation if in future a disgruntled investor initiates legal proceedings against the company. What information is material and needs to be disclosed in the prospectus depends on and varies according to the specifics of each company and the circumstances surrounding the proposed
securities offering. The administrative regulations of the CMA shed some light on the issue by prescribing a detailed list of minimum information that must be included in the prospectus (see Administrative Decision 12/2005 issued on 31 December 2005).
A prospectus must be published upon the public or private issuance of securities Having discussed the contents of the prospectus above, it is worth looking beyond the definitions of “Securities”, “Public Subscription” and “Private Subscription” in the CML to assess the full scope of the CML and the reach of the CMA. If in doubt, an issuer should always contact the CMA to discuss whether an offer is indeed an offer to the public or an invitation to a specified category subject to the prospectus requirements. The author is a Senior Associate, Al Alawi & Co., Advocates & Legal Consultants
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