The purpose of the prospectus is to ensure that the company gives to the public a certain amount of information about its financial position when it is first floated and whenever it subsequently offers its shares and debentures to the public. It must fully and fairly disclose the relevant facts so the risk of investment can be assessed (Vanessa, 2011).

Prospectus is a way to give the public a clear understanding of newly listed companies, the investing public should take time to read before investment. The providing of prospectus can also reduce the risk of fraud of companies as they need to disclose their companies’ information fully and fairly.

From the Companies Ordinance, prospectus means any prospectus, notice, circular, brochure, advertisement, or other document which offering any shares or debentures of a company to the public for subscription or purchases, or calculated to invite offers by the public to subscribe or purchase shares or debentures.

If the shares or debenture are offered to any section of the public, whether selected as members or debenture holders or as clients of the person making the offer or invitation, or in any other manner, it is to be regarded as an offer or invitation to the public(s 48A(1)).
Thus, whether the document technically constitutes an offer or invitation to the public, it will fall within the prospectus provisions.

The provision relating to prospectuses apply as the shares or debentures had been offered to the public by the company and as if the persons accepting the offer were subscribers(s 41(1)).
Section 41 ensures that an allotment to X, followed by an offer to the public by X, cannot be used as a device to avoid the prospectus provision.

The Securities and Futures Commission(SFC) may exempt any class of companies or any class of prospectuses from some of the requirements under the Companies Ordinance from all of any of the section 38(1), 38(1A), 38(3), 38(7), 38D(3) & (4), 42(1), 42(4), 44A(1), 44A(2),44A(6), 44B(1) & (2) if the SFC considers it is fit and that exemption will not prejudice the investing public and that compliance is irrelevant or unduly burdensome or otherwise unnecessary or inappropriate(Vanessa, 2011).

It is said that when listed companies apply exemptions from compliance, the main consideration of SFC is whether the exemption will hurt the interest of investing public. If the exemptions do not affect the interest or decision-making of investing public, or the exempted parts are not important to them, the SFC will grant the exemption. So it is not much unnecessary restriction on the prospectus and it can say that the regulator gave a certain extent for the exemption from compliance. The detailed examples are showed as follow.

Section 38(1) which is concerned with the content of a prospectus and compliance with Sch3. From the Department of Justice, it stated that every prospectus issued by or on behalf of a company must either be in the English language and contain a Chinese translation or be in the Chinese language and contain an English translation, and must state the matters specified in Part I of the Third Schedule and set out the reports specified in Part II of that Schedule, and the said Parts I and II shall have effect subject to the provisions contained in Part III of the said Schedule.
Companies provide both English and Chinese versions of prospectuses undoubtedly increase the readability for the related party. However, the exemption from this section would not affect the company as a listed company and prejudice the investing public. The content of the prospectus of a company would not alter if only Chinese version was provided.
Sun Art Retail Group Limited has obtained from the SFC a certificate of exemption from strict compliance with section 38(1) of the Companies Ordinance in respect of the contents of the Supplement Prospectus. The certificate of exemption is granted on the grounds that the inclusion of the requisite information as required under section 38(1) of the Companies Ordinance would be unnecessary and unduly burdensome, given that the required information has been included in the Prospectus which will be read in conjunction with this Supplemental Prospectus.

Section 38(1A) which is concerned with the warning statement required by Sch 18. It stated that every prospectus to which subsection Section 38(1) applies must contain a statement specified in Part 1 of the Eighteenth Schedule. For example, written as “IMPORTANT. If you are in any doubt about any of the content of this prospectus, you should obtain independent professional advice.”

Section 38(3) which as a general rule requires a prospectus to accompany the issue of every application from for shares or debenture. It stated that it shall not be lawful to issue any form of application for shares in or debentures of a company unless the form is issued with a prospectus which complies with the requirements of this section. However, if it is shown that the form of application was issued in connexion with a bona fide invitation to a person to enter into an underwriting agreement with respect to the shares or debentures; in relation to shares or debentures which were not offered to the public; or in connexion with an offer specified in Part 1 of the Seventeenth Schedule as read with the other Parts of that Schedule, this subsection shall not apply.

Section 38(7) which is concerned with guarantor corporations. It stated that it is hereby declared that the provisions of the Third Schedule applied by this section are also applied to a guarantor corporation in relation to an offer or invitation to the public to subscribe for or purchase debentures of a company.

Section 38D(3) & (4) concern the registration of a prospectus. It stated that the prospectus shall be made in writing to the Commission and there shall be delivered to the Commission together with the application a copy of the prospectus proposed to be registered which has been signed by every person who is named therein as a director or proposed director of the company or by his agent authorized in writing and having endorsed thereon or attached. If the copy of a contract required thereby to be endorsed on or attached to a copy of the prospectus shall, in the case of a contract wholly or partly in a language other than English or Chinese, be taken as references to a copy of a translation of the contract in either language or a copy embodying a translation in English or Chinese of the parts not in either language, as the case may be, being a translation certified in the prescribed to be a correct translation.

Section 42(1) which prohibits an allotment of shares to the public unless the minimum subscription stated in the prospectus is met. It stated that subject to section 38A, no allotment shall be made of any share capital of a company offered to the public for subscription unless the amount stated in the prospectus as the minimum amount which, in the opinion of the directors must be raised by the issue of share capital in order to provide for the matters specified in paragraph 7 in Part I of the Third Schedule has been subscribed, and the sum payable on application for the amount so stated has been paid to and received by the company. For the purposes of this subsection, a sum shall be deemed to have been paid to and received by the company if a cheque for that sum has been received in good faith by the company and the directors of the company have no reason for suspecting that the cheque will not be paid.

Section 42(4) which requires money to be returned to applicants within 38 days of the issue of the prospectus where the minimum subscription is not met. It stated that subject to section 38A, if the conditions aforesaid have not been complied with on the expiration of 30 days after the first issue of the prospectus, all money received from applicants for shares shall be forthwith repaid to them without interest, and, if any such money is not so repaid within 38 days after the issue of the prospectus, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of 8 per cent per annum from the expiration of the 38th day and provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.

Section 44A(1) which prohibits allotment until the third day after the issue of a prospectus. It stated that no allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus issued generally and no proceedings shall be taken on applications made in pursuance of a prospectus so issued, until the beginning of the 3rd day after that on which the prospectus is first so issued or such later time (if any) as may be specified in the prospectus.
The beginning of the said 3rd day or such later time as aforesaid is hereafter in this Ordinance referred to as the time of the opening of the subscription lists.
The CW Group Holdings Limited has obtained from the SFC a certificate of exemption from strict compliance with Section 44A(1) of Companies Ordinance in relation to the opening of the application lists for the allotment of the Shares following the issue of the Prospectus as amended by this supplemental prospectus. The certificate of exemption is granted on the grounds that the section would be unnecessary and unduly burdensome given that the listing timetable has to be delayed and the Directors are satisfied that the rights of the Eligible Applicants and the investing public will not be prejudiced, as the Eligible Applicants will be given adequate opportunities to confirm whether or not to proceed with their applications after considering the additional information contained in this supplemental prospectus.

Section 44A(2) which requires the allotment of shares or debentures within 30 days after the issue of a prospectus. It is stated that no allotment shall be made of any shares in or debentures of a company in pursuance of a prospectus issued generally later than 30 days after the day on which the prospectus is first so issued.

Section 44A(6) which limit the period for revoking applications for shares or debentures. It is stated that an application for shares in or debentures of a company which is made in pursuance of a prospectus issued generally shall not be revocable until after the expiration of the 5th day after the time of the opening of the subscription lists, or the giving before the expiration of the said 5th day, by some person responsible under section 40 for the prospectus, of a public notice having the effect under that section of excluding or limiting the responsibility of the person giving it.

Section 44B(1) & (2) which concern an application for listing the shares or debentures offered in a prospectus. It stated that whether prospectus are issued generally or not, states that application has been or will be made for permission for the shares or debentures offered thereby to be listed on any stock exchange, any allotment made on an application in pursuance of the prospectus shall, whenever made, be void if the permission has not been applied for before the 3rd day after the first issue of the prospectus or if the permission has been refused before the expiration of 3 weeks from the date of the closing of the subscription lists or such longer period not exceeding 6 weeks as may, within the said 3 weeks, be notified to the applicant for permission by or on behalf of the stock exchange. Where the permission has not been applied for as aforesaid, or has been refused as aforesaid, the company shall forthwith repay without interest all money received from applicants in pursuance the prospectus, and, if any such money is not repaid within 8 days after the company becomes liable to repay it, the directors of the company shall be jointly and severally liable to repay that money with interest at the rate of 8 per cent per annum from the expiration of the 8th day and provided that a director shall not be liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part. Apart from the exemption from some section of the Companies Ordinance which stated above, there are some other exemptions from compliance.

Rule 10.08 provide that no further shares of a listed issuer may be issued or form the subject of any agreement to such issue within 6 months from the date on which securities of the listed issuer first commence dealing on the Exchange.
For example, Company A as a Main Board applicant whose shares were listed on a foreign exchange and it sought a dual primary listing by way of introduction on the Main Board. The Exchange granted a waiver of Rule 10.08 so that Company A would not be restricted from issuing shares during the first six months of its listing on the Exchange.

It is believe that the regulator give certain extent for the exemption from compliance. The SFC may grant exemption whenever the exemption will not prejudice the interest of investing public. This can enhance the convenience of companies to issue the prospectus and some of the exemption eliminated the unnecessary portions and made the purpose of prospects more effective.