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

Lumina Inc., a foreign company, issues a prospectus in India inviting the public to subscribe to its shares. The prospectus contains a materially untrue statement. Under the Companies Act, 2013, what is the correct position about liability?

Persons who authorised the issue of the prospectus are liable for the untrue statement, just as under the prospectus provisions for Indian companies, which apply to foreign companies with the necessary modifications. Foreign incorporation does not shield the company or those responsible.

  1. AOnly the company is liable, never individuals
  2. BPersons who authorised the issue of the prospectus are liable for the misstatement, as under the provisions applicable to prospectuses of Indian companiesCorrect
  3. CNo liability arises because the company is incorporated outside India
  4. DLiability arises only if the Indian Registrar has approved the prospectus in writing

Explanation

The provisions relating to prospectus, including liability for misstatements, apply to foreign companies offering securities in India, with prescribed modifications. Persons who authorise the issue are therefore liable, as well as the company. Foreign incorporation is no defence.

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