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    Question

    Who can be held liable to pay compensation to a person who sustains loss or damage due to misleading statements in a prospectus, according to the provisions of the Companies Act?

    A Only the directors of the company Correct Answer Incorrect Answer
    B Only the promoters of the company Correct Answer Incorrect Answer
    C Only the experts referred to in section 26(5) Correct Answer Incorrect Answer
    D The company and every person who is a director, promoter, and expert Correct Answer Incorrect Answer
    E Shareholders of the company Correct Answer Incorrect Answer

    Solution

    Section 35.Civil liability for mis-statements in prospectus: (1) Where a person has subscribed for  securities  of a company acting on any statement included, or the inclusion or omission of any matter, in the  prospectus  which is misleading and has sustained any loss or damage as a consequence thereof, the company and every person who— (a) is a director  of the company at the time of the issue of the prospectus; (b) has authorised himself to be named and is named in the prospectus as a director of the company, or has agreed to become such director, either immediately or after an interval of time; (c) is a  promoter of the company; (d) has authorised the issue of the prospectus; and (e) is an  expert referred to in sub-section (5) of section 26,shall, without prejudice to any punishment to which any person may be liable under section 36, be liable to pay compensation to every person who has sustained such loss or damage.

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