Section 35 of CA 2013 : Section 35: Civil Liability For Mis-Statements In Prospectus

Explanation using Example

Imagine that Sarah invested in a new tech startup, XYZ Technologies, after reading its prospectus which claimed the company had a patented technology with significant market potential. A few months later, it was discovered that the technology was neither patented nor unique, and the company's value plummeted, causing Sarah to lose a substantial part of her investment.

Under Section 35 of the Companies Act, 2013, Sarah can seek compensation for her losses from XYZ Technologies and the individuals responsible for the prospectus, including:

• The directors of XYZ Technologies at the time the prospectus was issued;
• Any person who consented to be named in the prospectus as a future director;
• The promoters of the company;
• Persons who authorized the issue of the prospectus;
• Any experts whose reports were included in the prospectus.

However, if one of the directors had resigned before the prospectus was issued and had not consented to it, or if an expert's report was accurately included and they believed the expert was competent, they might not be held liable under this section.

If it were proven that the prospectus was issued with the intent to defraud investors, all responsible parties could face unlimited liability for the losses incurred by Sarah and any other investors misled by the false claims.