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(c) Qualification. A director must acquire his qualifica- tion shares within two months of his appointment. If after that period he acts as a director without holding bis qualification shares he is liable to a fine of $50 a day.
It
(d.) Prospectus,—The prospectus, or statement in lieu of prospectas, must contain the names, descriptions, and addresses of the directors or proposed directors, and no one can be named in the prospectus as a director or proposed director until he has filed with the registrar of companies a consent to act as such and a contract to take and pay for his qualification shures. The prospectus, or statement in lieu of prospectus, must be signed by every director or proposed director. must contain full particulars of the interest of every director in the promotion or in the property to be acquired by the company, and a statement of all sumis paid or agreed to be paid to him to induce him to become a director or for services in connection with the promotion of the company. If the prospecins contains misleading statements the onus is thrown on the director or promoter to prove that he had reason- able ground for believing, and did up to allotment believe, that the statements were true; at present the onus is on the subscriber to show that the director or promoter knew the statements to be false. And even if the prospectus was issued, or the untrue statement was made, without his knowledge, he is still liable anless it is proved that ou becoming aware of the issue of the prospectus or of any untrue statement therein, be forthwith gave reasonable public notice of the fact. (e) Allotment-Directors are liable civilly and criminally for breaches of the provisions as to allotment. (Sco the paragraph headed “Allotment ".)
(f.) Commencement of Business.-Directors are criminally liable for breaches of the restrictions on commence- ment of business. (See the paragraph headed "Com- mencement of Business ".)
(a.) Winding up.--In a winding up by the court, the Official Receiver may report on the conduct of the directors and if he reports frand the court may order them to be publicly examined. They have in any case to submit to the Official Receiver a statement, verified by affidavit, as to the affairs of the company. (See further the paragraph headed "Winding up by the Court") (h) Auditors.--The stricter duties thrown on the auditors by the Bill will also act as a check on the directors and promotors. (See the paragraph fioaded “Audi- tors ".)
(2) Generally throughout the Bill penalties are imposed on directors who are parties to contraventions of its provisions.
(1) Relief-Power is given to the court to grant relief, wholly or in part, to directors charged with negligence
or breach of trust, where the court thinks that they acted honestly and reasonably and ought fairly to be excused (Act of 1907).
Most of the special provisions relating to directors and pro- moters were introduced in the United Kingdom by the Directors Liability Act of 1890 or by the Companies Act of 1900. The Ordinance, reference given below are necessarily incomplete. Nil; Act, Sections 26, 72, 73, 75, 80 to 86, 147, 148, 175, 279; Bill, Clauses 27, 73, 74, 76, 81 to 87, 141, 142, 169, 258.
Prospectuses.
Under the present law, a prospectus must specify the dates and names of the parties to any contract which has been entered into by the directors or promoters, but there are no other statutory requirements whatsoever; and a subscriber who has been misled
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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 hade 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 ander 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 ou which the directors may proceed to allotinent, and the amount payable on application and allotment.
paid
(5) The number of shares and debentures issued as
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 procnring 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- and a statement of all sains 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.
pany.
(1.) Filing A copy of every prospectus, signed by every person named therein as a director or promoter, musi 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.
(c) Statement in lieu of Prospectus.-A company which does not issue a prospectus must instead file a "statement in lieu of prospectus" which must contain the same particulars as a prospectus and must be signed by all the directors. Dutil 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 be 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 trae. 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, be forth- with gave reasonable public notice of the fact.
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