as amended by the Amendment Act of 1988, states that no application form can be issued for shares or debentures of a company unless it is accompanied by an abridgedprospectus which complies .Nvith the requirements of the Act. However, the full prospectus is to be furnished on a request being made by any person befoie the closing of the subscription lit.If any person acts in contravention of this provision, he shall be punish 2: with fine Much may extend to five thousand rupees.
114 KWG'S: SECRETARIAL PRACTICE
MIS-STATEMENT IN A PROSPECTUS
Q. 21. Discuss the conseqmences of a rhis-statement in a pry -Or
State the liabilities for mis-statement in the prospectus.
Ans The Indian Companies Act attaches great importance to tin prospectus i t is maintained. and truly so, that the prospectus is a document which helps the promoters to raise public money The subscribers do not know much about the venue being floaed_Neither they have any intmnate relation with the venture coining up Thus they must know all details To themthe prospectus is made available which is educative as well as incitation to mvestment it should be free from all doubts Itshouldbe clear and premised There should be no misstatement mis-representation or suppression of facts relating to matters contained in the prospectus if blere is one, Uhe persons , responsible for its publication are liable for heavy penalties. On accoumt of failure to disclose material facts, or tlteir wilful concealment or misrepresentation the persons, rapmlsible incur two types of liability Ube Civil Liability as well as Criminal Liability.
L Civil Liabitity ISection 62(1)]. any one purchases shares or debentures believing that whatever is contained in the prospectus is true and tiiere is no mis-statement or misrepresentation and later his faiUh is shattered and he suffers any damage or incurs loss because of his faiUI being not vindicated, he thee is entitled to claim cGmpensahon for Uhe loss or damages for wltich he may go for civil action against the directors, promoters and all those persons who have been authorised to issue
The expert: WilO has given his consent to the issue of prospectus is not liable unless he has made statement believing not to be true and thus on his thing untrue statement the investor has been induced to buy Uhe shares or debentures of Abe compamy
Kiln case the,sharesdebentures are purchased on false material facts and IS proved that it was a wilful concealment of fact, Uhe investor has Ule right to rescind Ule allobnent of shares, claim back the money already paid against such allotment and even proceed against the directors for damages
Skin-saving provision. Ho nertbe provisions [Section 62(2)] are also there to save Uhe skm of those who after detection, by to rectrfy their misdeeds in one fonn or She other. The director, promoter or the authonsed person(s) shall not be liable ff he is able to proved that:
- (i) hehad withdrawn his consent to become a directorbefore She issue of prospectus and hid given -proper public notice to Uhe effects
(ii) Ule prospectus was issued without his knowledge and consent and on conung to know of its issue he had given proper public notice to Uhe effect;
(iii) he came to know about the Dmtlue statement alter Uhe issue of We prospectus and on coming to know he had withdrawn his crtr and had given proper public notice to the effect:
114 KWG'S: SECRETARIAL PRACTICE
MIS-STATEMENT IN A PROSPECTUS
Q. 21. Discuss the conseqmences of a rhis-statement in a pry -Or
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