Question

State with reasons whether the following statements are True or False:

Nobody is liable for mis-statement in the prospectus.

• A. True
• B. False

Answer 1

The correct option is B False

(i) Prospectus is a written document giving an invitation to the public to purchase shares or debentures of the company.

(ii) It provides all the necessary information about a company, its business, the management, financial structure, etc. of a company.

(iii) A prospectus must be prepared very carefully and accurately.

(iv) It should contain true and correct information and honest disclosure of facts.

(v) A company and all those persons (directors, promoters and others) can be held responsible for any mis-statement in the prospectus.

(vi) These people have to face severe consequences.

(vii) The shareholder can cancel the contract i.e. they can refuse to take shares and pay for it and can sue the claim for damage or losses.

(viii) Persons authorising the issue of prospectus containing mis-statement are punishable with imprisonment of two years and a fine upto 5000/-.