what are the remedy is available to shareholders against the company for mis - statement in the prospectus ?
Answers
Answer:
The person who purchased shares on the basis of the prospectus containing misstatements can rescind the contract (cancel the contract). He is eligible for rescission whether the misstatement is made intentionally or unintentionally. He has to surrender his shares to the company.
Explanation:
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The "prospectus" is a document that calls for future investors to "subscribe" to a company's shares & debentures. This would thus contain accurate and truthful material facts and therefore no material facts must be distorted.
Explanation:
If the prospectus includes a "misleading statement", the liability of the company, promoters, the directors, & others who authorised the issue can be classified into civil liability, criminal liability & liability under the "law of contract"
(a) Civil Liability: Anyone who has purchased shares on the basis of the prospectus with misstatement could rescind/cancel the contract. He/she has the right to cancel, whether the error is made intentionally or not. He/she must surrender to the company his shares. The money he paid is reimbursed by the company. The aggravated shareholder, once the contract has been rescinded, can claim for damages from the company by filing a suit in the Court. He/she must be prove that there misstatement be dishonest. However there must be "untrue statement", "misstatement must be material", the person must have "relied" on the "untrue statement". Within a reasonable period & before the liquidation of the company, the person/shareholder shall apply for cancellation. The shareholder should not have approved the purchase deal.
The promoters, directors, experts and others authorized to issue the prospectus are "liable" to the aggravated person/shareholder to make up for loss or damages caused by the wrong statement. If a "material fact" has been "omitted" from the prospectus, (a) the "person responsible" for the issue shall be "fined" up to INR 50000 and (b) the aggrieved person can "recover damages" from the person/persons who is/are responsible for the prospectus issue.
(b) Criminal Liability: Where a prospectus makes a false assertion, anyone who has authorised the issue will be penalized with a fine of up to INR 50000, or for up to 2 years in jail or both. Anyone who makes any misstatement in the prospectus dishonestly, so as to encourage people to invest money in the corporation shall be punished with imprisonment for up to 5 years or fine up to Rs.1,000 or both.
(c) Liability Under General Contract: Under this, damages can be recovered, by the grieved shareholder, from any of the individuals (persons) who is liable for issuing the prospectus . What is needed is to show that there is misstatement/omission of material facts and the disclosure is fraudulent.
The person who had -purchased shares in the "open market" from any "shareholder" of the company (by not "relying" on the "prospectus") however, cannot "rescind the contract" for the "purchase of shares". The person who authorised the "issue of prospectus" too cannot be held liable
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define a prospectus and state in contents - Brainly.in
https://brainly.in/question/5551631