Q.Explain the civil liability for mis-statement in a prospectus under Section 35 of the Companies Act, 2013.

An investor who buys shares because a prospectus told them something untrue should not be left to bear the resulting loss alone.

Section 35 of the Companies Act, 2013 gives an investor a direct statutory remedy against the specific individuals responsible for a misleading prospectus, rather than leaving them to pursue the company alone (which may, in any event, have limited assets or may already be in financial difficulty by the time the mis-statement is discovered).

Where a prospectus, issued by or on behalf of a company, includes any statement that is untrue or misleading, and a person subscribes for securities on the faith of that prospectus and suffers loss or damage as a result, that person may claim compensation from:

• every director of the company at the time the prospectus was issued;
• every person who has consented to be named, and is named, in the prospectus as a proposed director;
• the promoter of the company;
• every person who has authorised the issue of the prospectus, including an expert to the extent that a statement is attributed to them. …

Students often say only 'the company' is liable for a prospectus mis-statement - Section 35 fixes liability on named individuals (directors, promoter, consenting proposed directors, authorisers), not on the …