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

Meridian Corp., a foreign company, issues an advertisement in India inviting the public to subscribe to its shares. The document contains a statement that is untrue and misleading about its Indian operations. Which of the following describes the correct legal position?

A foreign company's prospectus issued in India must comply with the Act's prospectus provisions, with prescribed modifications, and the liability for misstatements, civil and criminal, applies to persons who authorised its issue. Being incorporated abroad gives no immunity from Indian prospectus law.

  1. AChapter XXII exempts a foreign company from prospectus liability, so only the Indian regulator can act
  2. BThe document is treated as a prospectus only if it is issued by an Indian company
  3. CProvisions on prospectus and civil and criminal liability for misstatement apply to a foreign company's prospectus issued in India, subject to prescribed modifications, and persons authorising it may be liableCorrect
  4. DOnly the foreign regulator of the home country can proceed against the persons who issued it

Explanation

The Act requires that a prospectus issued by a foreign company inviting the Indian public to subscribe to its shares or debentures comply with the provisions on prospectus, with modifications as prescribed. Liability for misstatement, civil and criminal, extends to persons who authorise the issue. The other options either exempt foreign companies wrongly or restrict jurisdiction to the home country, which is incorrect.

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