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by a false statement in a prospectus, in order to succeed against a director or promoter, must prove affirmatively that the director or promoter knew the statement to be false or made it recklessly not caring whether it was true or false. The Bill throws the onus in such a case on the director or promoter, and introduces several other provisions designed to guard the public against misleading prospectuses and to increase the liability of directors and promoters for the statements made in prospectuses. These may be classified under the following heads:
(a.) Contents. -Every prospectus must state :-
(1) The contents of the memorandum.
(2) The directors' qualification and remuneration.
(3) The names, addresses and descriptions of the directors
or proposed directors.
(4) The minimum subscription on which the directors may proceed to allotment, and the amount payable ou application and allotment.
(5) The number of shares and debentures issued as paid up otherwise than in cash, and the consideration for them.
(6) The names and addresses of the vendors and the amount payable to them for the property.
(7) The amount paid or payable as commission for sub- scribing or procuring subscriptions for the shares or debentures of the company.
(8) The amount or estimated amount of preliminary ex-
penses.
(9) The amount paid or to be paid to any promoter, and
the consideration,
(10) The dates and parties of every material contract, and a reasonable time and place at which the con- tracts may be inspected.
(11) The names and addresses of the auditors. (12) Full particulars of the nature and extent of the in-
terest of every director in the promotion of, or in the property proposed to be acquired by, the com- pany, and a statement of all sums paid or agreed to be paid to him, in cash or otherwise, to induce him to become a director or otherwise for services rendered by him in connection with the promotion. (b.) Filing.—A copy of every prospectus, signed by every person named therein as a director or promoter, must be filed with the registrar of companies before the prospectus can be published. Every one who is a party to the issue of a prospectus which has not been filed is liable to a fine of $50 a day.
statement
(c.) Statement in lieu of Prospectus.--A company which does
not issue a prospectus must instead file a in lieu of prospectus" which must contain the same particulars as a prospectus and must be signed by all the directors. Until this is filed, the company can neither allot shares nor commence business.
(d.) Remedies of Subscribers.-At present, where a subscriber has been induced by a misrepresentation in the pros- pectus to apply for shares, in order to succeed against a director or promoter he must prove affirmatively that the director or promoter knew the statement to be false or made it recklessly not caring whether it was true or false. This is a difficult matter. In future, the onus will be on the director or promoter, and he will be liable unless he can prove that he had reason- able ground to believe, and did up to allotment believe, that the statemenot was true. And even if the pros- pectus was issued, or the untrue statement was made, without his knowledge, he will not be relieved unless it is proved that on becoming aware of the issue of the prospectus or of any untrue statement therein, he forth- with gave reasonable public notice of the fact.
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