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Chapter 4: Public Offerings of Company Securities
Part None: None

s104: Liability for untrue statements in prospectus

(1) If securities are offered to the public for subscription or sale pursuant to a prospectus, every:

(a) person who becomes a director between the issuing of the prospectus and the holding of the first general shareholders meeting at which directors are elected or appointed;

(b) person who has consented to be named in the prospectus as a director, or as having agreed to become a director either immediately or after an interval of time;

(c) promoter of the company; or

(d) person who:

(i) authorised the issue of the prospectus or, under this Act, is regarded as having authorised the issue of the prospectus; or

(ii) made that offer to the public,

is liable to compensate any person who acquired securities on the faith of the prospectus for any loss or damage the person may have sustained as a result of any untrue statement in the prospectus, or in any report or memorandum appearing on the face of, issued with, or incorporated by reference in, the prospectus.
(2) Liability contemplated in this section does not attach to a person if:

(a) with respect to every untrue statement not purporting to be made on the authority of an expert or of a public official document or statement, that person had reasonable grounds to believe, and did up to the time of the allotment of the securities or the acceptance of the offer, as the case may be, believe that the statement was true;

(b) with respect to every untrue statement purporting to be a statement by an expert or contained in what purports to be a copy of or extract from the report or valuation of an expert:

(i) the untrue statement fairly represented the statement or was a correct and fair copy of or extract from the report or valuation; and

(ii) the person had reasonable grounds to believe and did up to the time of the issue of the prospectus believe that the expert who made the statement was competent to make it, and consented, as required by this Act, to the issue of the prospectus or the making of the offer and had not withdrawn that consent:

(aa) before the prospectus was filed; or

(bb) to that person’s knowledge, before any allotment under the prospectus, or before the acceptance of the offer;

(c) any untrue statement purporting to be a statement made by an official person or contained in what purports to be a copy of or extract from a public official document was a correct and a fair representation of the statement or copy of or extract from the document;

(d) that person consented to become a director of the company, but subsequently withdrew that consent before the issue of the prospectus, and it was issued without that person’s consent;

(e) the prospectus was issued without the knowledge or consent of that person and, on becoming aware of its issue, that person forthwith gave reasonable public notice that it was issued without the knowledge or consent of that person; or

(f) after the issue of the prospectus and before allotment or acceptance thereunder, that person, on becoming aware of any untrue statement in it, withdrew any consent to the prospectus and gave reasonable public notice of the withdrawal and of the reason for it.

(3) If a prospectus contains the name of a person as a director of the company, or as having agreed to become a director of that company, and that person has not consented to becoming a director, or has withdrawn consent before the issue of the prospectus, and has not authorised or consented to the issue of the prospectus, the directors of the company, except any without whose knowledge or consent the prospectus was issued:

(a) are liable to the extent set out in section 77(3)(d)(ii); and

() any other person who issued the prospectus or authorised the issue of it, is liable, together with the directors, to indemnify any person incorrectly named as a director against any damage, cost or expense arising as a result of that person having been so named in the prospectus, or incurred in defending against any action or legal proceedings brought in respect of having been so named in the prospectus.

(4) Subsection (4), read with the changes required by the context, applies equally in respect of any other person whose consent is required in terms of this Act in connection with any thing contained in a prospectus, and who has either:

(a) not given that consent; or

(b) has withdrawn it before the issue of the prospectus.

(5) A person who, by reason of:

(a) being a director, or having been named as a director;

(b) having agreed to become a director;

(c) having authorised the issue of the prospectus; or

(d) having become a director between the issue of the prospectus and the holding of the first general shareholders meeting at which directors are elected or appointed,

has satisfied any liability under this section by making a payment to another person, may recover a contribution, as in cases of contract, from any other person, who, if sued separately, would have been liable to make the same payment, unless the person who has satisfied such liability was, and that other person was not, guilty of fraudulent misrepresentation.

Related Sections

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