What is a misleading prospectus?

What is a misleading prospectus?

The prospectus which contains mis-statements or misleading statements, is called Misleading Prospectus.

What are the remedies for misrepresentation in prospectus?


  • Revocation of the Contract- The person who purchased the securities can cancel the contract. The money will be refunded to him, which he paid to the company.
  • Damages for Fraud- After revocation, the shareholders can claim damages from the company by filing a case in the court.

What are the causes of misstatements in a prospectus?


  • Any untrue statement.
  • Statements implicating wrong impression.
  • Mis-leading statements.
  • Not disclosing true facts.
  • Omission of data.

What is misstatement in prospectus who are liable for such untrue statement?

A person who has signed and given consent to the prospectus is liable for misstatement. Persons who had the management of the whole, or substantially whole of the affairs of the company can be held liable for misstatement in prospectus if they have signed the prospectus and had given consent for the same.

What is misleading prospectus and its consequences?

Consequences of misleading prospectus: The persons responsible for preparing false and misleading prospectus will face the civil and criminal liability. (a) Civil Liability: In case misleading prospectus amounts to misrepresentation aggrieved party can repudiate the contract and can claim a refund of their money.

What are the consequences of a misleading prospectus?

Criminal Liability If a prospectus contains any untrue statement, every person who authorized the issue are punishable with fine up to Rs. 50,000 or with imprisonment up to 2 years or with both.

What are the civil and criminal liabilities for giving wrong information in the prospectus?

Where a prospectus issued, circulated, or distributed includes any statement that is untrue or misleading in any form in which it is included or where any inclusion or omission of any matter is likely to mislead, every person who authorises such issue of the prospectus shall be liable for fraud.

When there is untrue statement in prospectus who can sue?

Section 35 of the Companies Act provides for civil liability for misstatement in prospectus. Under Section 36, those liable to pay compensation include the directors of the company at the time of the issue of the prospectus and the promoters, among others, to every person who has sustained loss or damage.

Who is liable with false prospectus?

A seller may be liable for a prospectus (or oral communication) containing untrue statements of material fact or materially misleading omissions made in connection with a public offering, whether or not the offering is made pursuant to a registration statement filed with the SEC (section 12(a)(2), Securities Act).

When a statement in prospectus is deemed to be misleading and what are its consequences?

In cases where the fraud involves public interest, the term of imprisonment shall not be less than three years. Since, in this case, an IPO public interest is involved, any misstatement in the prospectus will lead to a minimum punishment of three years, said another lawyer.

Who can sue for untrue statement in a prospectus?

What is misrepresentation in prospectus what are its consequences?

A misrepresentation is defined as the inclusion or omission of a fact that is likely to mislead the public. The prospectus shall be regarded a prospectus with an erroneous statement if a relevant matter has been omitted from the prospectus and such omission is likely to mislead the public.

What are the elements of a misleading prospectus?

1) The statements is misleading in the form and context in which it is included and 2) The omission from a prospectus of any matter is calculated to mislead.

What is mis-statement in prospectus?

2) The omission from a prospectus of any matter is calculated to mislead. The prospectus which contains mis-statements or misleading statements, is called Misleading Prospectus. The liability may be civil or criminal. Who are liable for mis-statement in the prospectus?

What is a misleading statement in a contract?

Misleading Statements. No representation or warranty by the Company in this Agreement or in the Offering Materials contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made not misleading. Misleading Statements.

What is material statement in prospectus?

A statement in a prospectus as to the persons who are to be directors is a material statement and if it is untrue, a person subscribing on the faith of it is prima facie entitled to rescind.

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