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Who would have been liable for a false statement in the prospectus, discuss the civil and criminal liability for such a false statement.

Meaning and Definition of Prospectus

A public company has to collect its capital along with obtaining the certificate of commencement of business. This work is given to the general public by issuing prospectus. As per the law it is mandatory for a public company to issue prospectus. Only then can it get capital from the public. A prospectus is a form by which a public company invites the public to purchase its shares, debentures or deposit deposits. In this, necessary information is provided by the company for the protection of investors and lenders. As per section 2(70) of the Companies Act, 2013, “Statement” means a form described or issued in the form of a prospectus and contains a red herring prospectus referred to in section 32 or a shelf-statement referred to in section 31 or any notices, pamphlets, advertisements or other forms soliciting offers from the public for subscription or purchase of securities of an incorporated entity. According to Topham and Topham, “Statement means a circular which is published by the promoters to induce the public to buy the shares of the company after its amalgamation.”


It is thus clear that “Any form by which an offer is invited from the public for deposits or for the purchase of shares or debentures for the company is called a prospectus.”

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