How is misstatements done in prospectus?

Misstatement may occur when a statement which is untrue or misleading in form or context is included in the prospectus. For e.g., a statement on the purpose of offering shares which is untrue, or statement on the locations of offices for a company which is misleading will amount to misstatement in the prospectus.

What is prospectus misrepresentation?

Misrepresentation is construed as any statement which is made, which is false in any material particulars, knowing it to be false, or which omits any material fact, knowing it to be material, he added. …

What are the remedies against 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 misstatements?

(a) Misstatement – A difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the. amount, classification, presentation, or disclosure that is required for the. item to be in accordance with the applicable financial reporting framework.

What is irregular allotment?

An allotment shall be irregular when, it is made by the company. Without receiving the minimum subscription or the application money subject to a minimum of 5% of the nominal value of the share, or. Without filing a statement in lieu of prospectus at least three days before the allotment, if no prospectus is issued.

What are the remedies available to a person aggrieved by refusal to register a transfer of shares?

If a public company without sufficient cause refuses to register the transfer of securities within a period of thirty days from the date on which the instrument of transfer or the intimation of transmission, is delivered to the company, the transferee may, within a period of sixty days of such refusal or where no …

What do you mean by a misleading prospectus What are the remedy is available to shareholders against the company for mist statement in the prospectus?

It means fraud. Nothing less than fraud must be proved. Any person induced by a fraudulent statement in a prospectus to subscribe for shares is entitled to sue the company for damages. He must prove the same matters in claiming damages for deceit as in claiming rescission of the contract.

What are the types of misstatements?

Three types of misstatement include factual misstatement, judgmental misstatements, and projected misstatements.

What are examples of errors or misstatements that could occur in preparation of an entity’s financial statements?

Examples of misstatement, which can arise due to error or fraud, could include: An incorrect amount has been recognised – for example, an asset is not valued in accordance with the relevant IFRS requirement.

What are Effect of irregular allotment?

An allotment which is not made after complying with the statutory requirements cited above, shall be considered as an invalid allotment and is void. But an irregular allotment is not an invalid allotment or a void allotment. An irregular allotment is only voidable at the instance of the allottee.

What is a misstatement in a prospectus?

Any statement that is incorrect or misleading is included in the prospectus then it would be termed as mis-statements in prospectus. Any inclusion or omission of a fact which is likely to mislead the public shall also be termed as a misstatement.

Who is liable for a misleading statement in a prospectus?

When any statement within the prospectus includes misleading or untrue information is distributed then everyone who authorized the issue of the prospectus is liable under section 447 of the Companies Act. WHO MAY BE SUED IN CRIMINAL LIABILITY FOR ANY MISSTATEMENT IN THE PROSPECTUS? The company that issues the prospectus.

What happens if a prospectus contains any untrue statement?

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. 2.

What are the consequences of misrepresentation in prospectus?

Anyone who fraudulently (knowingly) makes any misstatement in the prospectus to induce persons to invest money in the company is punishable with imprisonment up to 5 years or with fine up to Rs.1,00,000 or with both. 3. Liability under General Law of Contract