Question

Under the Companies Act, 2013, which combination of liabilities attaches to a person who authorised the issue of a prospectus containing a material untrue statement?

• A. Civil liability to compensate subscribers, and criminal liability under the Act unless defenses available are proved
• B. Only civil liability, criminal sanctions were abolished
• C. Only criminal liability, civil claims must be pursued against the company alone
• D. No liability if the person is a non-executive director

Hint:

Misstatement in prospectus = civil + criminal liability (Sections 34 & 35).

Answer 1

The Correct Option is A

Step 1: Civil liability for misstatement.
Section 35 of the Companies Act, 2013 provides that persons who authorised the issue of a prospectus containing an untrue statement are liable to compensate investors for loss or damage, subject to statutory defenses.
Step 2: Criminal liability.
Section 34 imposes criminal liability for issuing a prospectus with material misstatements, unless the accused proves the availability of statutory defenses.
Step 3: Conclusion.
Thus, both civil and criminal liabilities attach, unless defenses are successfully established. Hence, option (A) is correct.