Any mis-statement made in the Prospectus would attract the liability of the following persons under the Companies Act :
Understanding Prospectus Misstatement Liability
Misstatements or omissions in a company prospectus can lead to legal liability under the Companies Act for certain individuals involved.
Identifying Typically Liable Persons
The Companies Act holds specific individuals accountable for prospectus inaccuracies:
- Directors: Every person who is a director of the company when the prospectus is issued.
- Named Directors: Individuals who have consented to be named and are named in the prospectus as directors (current or future).
- Promoters: The individuals responsible for forming the company and preparing the prospectus.
These parties are generally liable due to their role in the company's management and the prospectus's creation and dissemination.
Analyzing Expert Liability
An expert (like a valuer or auditor) contributes a specific part to the prospectus. Their liability differs:
- Liability is restricted to the portion of the prospectus prepared or issued by the expert.
- Liability arises only if the expert has given valid consent to the issue of the prospectus and has not withdrawn it.
Option 4 states an expert is liable "in respect of every content" and mentions issues with consent endorsement. This is incorrect because:
- An expert is not liable for the entire prospectus content, only their specific contribution.
- While lack of proper consent affects liability, the scope described ("every content") is inaccurate for an expert.
Therefore, the statement describing the expert's liability in Option 4 is the incorrect one.
Important Questions from Company law
- The problem of double taxation in international transactions can be reduced by:
i. Market agreement
ii. Multilateral agreement
iii. Bilateral agreement.
iv. Trade agreement - Under the Companies Act 2013, which of the following company is required to constitute a Corporate Cocial Responsibility Committee?
(a) company having networth of Rs. 500 crore or more
(b) company having turnover of Rs. 1000 crore or more
(c) company having net profit of 5 crore or more
(d) company having net profit of 2 crore or more during any financial year
Choose the most appropriate option : - Which one statement is correct from the following statements ?
- Which of the following statement (s) is/are incorrect? Answer using codes given below :
(a) In Attorney General v. Great Eastern Railway Co. the House of Lords observed that the doctrine of ultra vires as it was explained in the Ashbury case, should not be maintained.
(b) Section 13 (i) (c) of the Companies Act provides incidental objects which need not be stated in the memorandum.
(c) If incidental objects are not stated in the memorandum, they would not be allowed by the principle of reasonable construction
(d) The doctrine of indoor management operates to protect insiders against the company
Codes : - Read Assertion (A) and Reason (R) and answer using the codes given below :
Assertion (A): Shareholders are not, in the eye of law, part owners of a company. The company is something different from the totality of the shareholders.
Reason (R) : Shareholders are collective owners of the company.
Codes :
