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CA Intermediate · Corporate and Other Laws · Prospectus and Allotment of Securities

Pioneer Foods Ltd. made a public offer through a prospectus. Anita applied for shares after relying on an expert's report included in the prospectus. The expert, Mr. Sharma, a chartered engineer, had given written consent before the prospectus was issued but withdrew the consent in writing before delivery of the copy to the Registrar for registration. The prospectus was nonetheless registered with the report included. Which of the following is correct?

The prospectus cannot validly include the expert's statement, because the expert's written consent must remain in force until a copy is delivered to the Registrar. Mr. Sharma withdrew consent before that delivery, so the issue with his report is defective and later notice to investors does not cure it.

  1. AThe prospectus is valid because consent once given cannot be withdrawn
  2. BThe prospectus is not validly issued with the expert's statement, since the consent was withdrawn before delivery to the RegistrarCorrect
  3. CThe prospectus is valid if the company informs Anita after allotment
  4. DThe withdrawal is effective only if made before the Board meeting

Explanation

A prospectus including a statement by an expert can be issued only if the expert has given written consent to its issue and has not withdrawn that consent before delivery of the copy to the Registrar. Here consent was withdrawn before delivery, so the prospectus including the report is not properly issued. Informing Anita after allotment does not cure the defect.

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