2. Prospectus:-
“Any document described or issued as a prospectus and
includes a notice, circular, advertisement or other document
inviting deposits from the public or inviting offers from the
public for the subscription or purchase of any shares in or
debentures of a body corporate”.
In other Words we can says that any document inviting the
public to buy its shares or debentures is called as prospectus.
4. When prospectus not required to issue:-
• when the shares or debentures are not
offered to the public.
• A private company is not required to
issue prospectus.
• where the invitation to the public by
newspaper advertisement.
• When company offer the shares to the
5. Untrue statement:-
• The statement included in the prospectus is misleading in the
nature.
• There is an omission from the prospectus of any matter which
is calculated to mislead.
• They can canceal any material (important information).
*case- Greenwood vs. leather shod wheels
co.(1900)
6. Who can be Sued:-
The company
Every Director
Every promter
Every person who authorized the issue of the prospectus.
Every Person whose name appeared in the prospectus.
8. Civil Liability:-
• Civil liability arises when there is a mis-statement or
misrepresentation of fact in a prospectus or an omission of
material. The shareholder who has purchased shares on the
faith of such mis-statement has remedy against for any loss or
damage suffered by him.
9. Remedies are claim against
company
directors,promoters,
experts and every
person who
authorized the issue
of prospectus.
10. Remedies against the company:-
A person who has been induced to subscribe for share may
Claim damages
Rescind the contract to take the securities
11. Rescission of the contract:-
1) prospectus was issued by or on the behalf of the company.
2) Statement must be untrue.
3) Statement must be a material misrepresentation.
4) Misrepresentation must be of facts and not of law.
5) That he has taken action promptly to rescind the contract.
12. Loss of the right to rescind the contract:-
a) Unreasonable delay.
b) Affimation.
c) Commencement of Winding up.
13. Criminal liability:-
If a prospectus contains any untrue statement, every person
who has authorized the issue of the prospectus is
punishable with imprisonment for a term which may extend
to two years, or with fine which may extend to five
thousand rupees, or with both.
14. Punishment for fraud:-
a) Imprisonment for a term which may not be less than six
months but which may extent to 10 years.
b) Fine which may be not less than the amount involved in
the fraud,but which may extent to the three times of the
amount involved in the fraud.
c) Both imprisonment and fine.
15. Defense available against civil and criminal liability:-
A person is not liable for civil and criminal liability if he proves that:
The untrue statement was immaterial.
As regards any matter not disclosed he proves that he had no
knowledge thereof.
After the issue of Prospectus but before the allotment he withdraw
his consent and he gave a reasonable public notice.
