Login

Home Sections→ 35 Civil liability for misstatements in prospectus.

35 Civil liability for misstatements in prospectus.

V Related Categories
CHAPTER III

Section 35 of Companies Act 2013

1.     Where a person has subscribed for securities of a company acting on any statement included, or the inclusion or omission of any matter, in the prospectus which is misleading and has sustained any loss or damage as a consequence thereof, the company and every person who—

a.     is a director of the company at the time of the issue of the prospectus;

b.    has authorised himself to be named and is named in the prospectus as a director of the company, or has agreed to become such director, either immediately or after an interval of time;

c.     is a promoter of the company;

d.    has authorised the issue of the prospectus; and

e.     is an expert referred to in sub-section (5) of section 26, shall, without prejudice to any punishment to which any person may be liable under section 36, be liable to pay compensation to every person who has sustained such loss or damage.

2.     No person shall be liable under sub-section (1), if he proves—

a.     that, having consented to become a director of the company, he withdrew his consent before the issue of the prospectus, and that it was issued without his authority or consent; or

b.    that the prospectus was issued without his knowledge or consent, and that on becoming aware of its issue, he forthwith gave a reasonable public notice that it was issued without his knowledge or consent.

3.     Notwithstanding anything contained in this section, where it is proved that a prospectus has been issued with intent to defraud the applicants for the securities of a company or any other person or for any fraudulent purpose, every person referred to in subsection (1) shall be personally responsible, without any limitation of liability, for all or any of the losses or damages that may have been incurred by any person who subscribed to the securities on the basis of such prospectus.

Short Notes:

  • The section except clause(e) came into force from September, 12, 2013 [Clause (e) of sub-section (1) is effective from 01st april,2014].

  • It provides that in case anyperson subscribes for securities on the basis of misleading statements orinclusion or omission of any matter in the prospectus resulting in any loss ordamage, the person who has authorized the issue of such prospectus or adirector, promoter, whosoever is liable, shall have to compensate every personwho has sustained such loss or damage.

Related Categories:

Related Discussions.

No discussions found.

Start a new Discussion



ENTER TITLE *  
DESCRIPTION *