A prospectus is a form that attracts the public to invest their money in the company. Any person is motivated to buy shares and debentures of companies on the basis of what is given in the prospectus. False statement and fraud do not mean only false statement but also any mistake which can mislead the public regarding the facts. In clear words, it means any such statement or mistake which can have an untrue effect on the mind of the public with respect to the real facts, the concealment of any important fact also comes under this. The ‘golden rule’ must be kept in mind while writing the content of the prospectus. According to this rule, the issuer of the prospectus should write each subject correctly and properly. Therefore, it is the responsibility of the issuers of the prospectus that nothing material should be concealed in the prospectus, no false statement or misrepresentation should be published which may deceive the appropriator and if this happens, all those persons who have produced the prospectus will be held guilty. has participated in.
As per Companies Act
(i) The particulars included in the prospectus are deemed to be false. If this description is deceiving in the context in which and in the form in which it is used, i.e. separately this statement may be true but it deceives in reading it with the context in which it is given, then it is considered false even though it is true. goes.
(ii) If any thing has been omitted in the prospectus and its readers have been deceived by not doing so, even then the prospectus will be treated as a false statement.