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AUDITORS LIABILITY TO THIRD PARTIES

AUDITORS LIABILITY TO THIRD PARTIES

AUDITORS LIABILITY TO THIRD PARTIES IN RELATION TO ISSUE OF PROSPECTUS:

Under section 35 of THE COMPANIES ACT 2013,
(1)Where the person has subscribed for securities of a company acting on any statement included, or the inclusion or omission of any matter, in the prospectus is misleading and he has sustained any loss or damage as a consequence thereof, the company and every person who-

  1. Is a director the company at the time of issue of the prospectus
  2. Has authorized himself to be named and is named in the prospectus as a director of the company or as agreed to become as a director either immediately or after an interval of time;
  3. Is a promoter of a company;
  4. Is an expert referred in sub section 5 of the section 26, shall without prejudice to any punishment to which any person may be liable under the section 36, be liable to pay the compensation to every person who has sustained such loss or damage.

(2) No person shall be liable under sub section (1), if he proves

  1. That having consented to become a director of the company, he withdrew his consent before the issue of prospectus, and that it was issued without his authority or consent.
  2. That the prospectus was issued without his consent and that on becoming aware of this issue he forthwith gave a reasonable public notice that it was issued without his knowledge or consent.

(3) Now withstanding anything contained in this section, where it is proved that prospectus has been issued with intent to defraud the applicants for the securities of a company or any other fraudulent purposes, every person referred to in the subsection (1) shall be personally responsible, without any limitation or liability, for all or any of the losses.

AUDITORS LIABILITY TO THIRD PARTIES

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