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CA Intermediate · Corporate and Other Laws · Companies Incorporated Outside India

Altair Corp., a foreign company, has a place of business in Hyderabad and issues a prospectus in India inviting the public to subscribe for its securities. Mr. Rao, an Indian investor, subscribed relying on a statement in the prospectus that was untrue. Which position is correct?

The prospectus provisions apply to a foreign company inviting the Indian public to subscribe, so persons who authorised the issue are liable for untrue statements in it. The remedy is not confined to Indian companies or the Indian agent alone.

  1. AThe prospectus provisions of the Companies Act apply to the foreign company, and persons who authorised the issue of the prospectus can be liable for untrue statementsCorrect
  2. BLiability arises only against Indian companies, so Mr. Rao has no remedy under the Act
  3. COnly the Indian agent of Altair Corp. is liable, and the persons who authorised the issue are not
  4. DLiability applies only if the prospectus was not filed with SEBI, regardless of the untrue statement

Explanation

The Act provides that the provisions on prospectus apply to a prospectus issued by a foreign company inviting the public to subscribe in India, with the stated modifications. Every person who authorises the issue of a prospectus is liable for misstatements in it. Liability is not limited to Indian companies or to the agent alone, and it does not depend on SEBI non-filing.

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