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- Liability arises only if the expert has given valid consent to the issue of the prospectus and has not withdrawn it.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
Arrange the following as per sections of the Companies Act, 2013 in descending order :
A. Execution of Bills of Exchange, etc.
B. Punishment in case of repeated default
C. Annual reports on Government Companies
D. Petition for winding up
E. Functions of Company Secretary
Choose the correct answer from the options given below:
Match List I with List - II.
List - I
List - II
(A)
Producer companies
(I)
Do not necessarily require Memorandum of Association
(B)
Statutory companies
(II)
Association not for profit
(C)
Section 8 company
(III)
Formed to convert cooperative into a company
(D)
Small company
(IV)
Paid up share capital is between 50 lakh-5 crore and turnover is between 2 crore - 20 crore
Choose the correct answer from the options given below:
Red herring prospectus is a prospectus issued:
- In every listed public company how many of the total number of directors shall be independent directors?
- The problem of double taxation in international transactions can be reduced by:
i. Market agreement
ii. Multilateral agreement
iii. Bilateral agreement.
iv. Trade agreement
