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

Rohan Infra Ltd issued a prospectus in which an expert's statement was included. The expert, a chartered engineer, had given written consent to the inclusion but later, before delivery of the prospectus for registration, withdrew the consent in writing. The company still delivered the prospectus to the Registrar with the statement. Which is the correct position?

The prospectus cannot validly include the expert's statement because the expert withdrew written consent before delivery to the Registrar for registration. Accuracy of the report is irrelevant. The company and its officers in default become liable to penalty for issuing a prospectus in contravention.

  1. AThe prospectus is valid because consent once given cannot be withdrawn
  2. BThe prospectus is valid if the expert's report was accurate
  3. CThe prospectus is not validly issued with that statement as the expert's consent was withdrawn before delivery for registration, and the company and officers are liable to penaltyCorrect
  4. DThe prospectus is valid because withdrawal needs the Registrar's approval

Explanation

A prospectus including a statement by an expert can be issued only if the expert has given written consent and has not withdrawn it before delivery of a copy to the Registrar for registration. Here consent was withdrawn before delivery, so including the statement contravenes the Act, attracting penalty and possible liability. Accuracy of the report does not cure the defect.

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