Effect of rescission, Business Law and Ethics

Effect Of Rescission:

Where a contract of allotment is rescinded, the former shareholder will be entitled to his money back (normally with interest) and to a refund of any expenses to which he has ben put: RE: BRITISH GOLD FIELDS OF WEST AFRICA LTD. The plaintiff will also be entitled to have the company's registers RECTIFIED by deleting his name therefrom, and he can prove in the company's liquidation for the amount due to him: RE: BRITISH GOLD FIELDS OF W. AFRICA.

 CIVIL LIABILITY OF DIRECTORS AND PROMOTERS

 Any person who subscribed for any shares or debentures on the faith of the prospectus may sue for compensation under S.45 of the Companies Act.

The section is limited to prospectuses issued by or on behalf of the company and will afford no relief on an offer for sale or placing by existing holders (unless the company has made the allotment with that in view, so that S.47 applies).

The section cannot be invoked by market purchasers of securities after the original allotment.

The only persons who can be made liable under the section are:-

a)      directors at the time of the matter of the prospectus;

b)      persons who consented to be named in the prospectus as directors or future directors;

c)      promoters of the company, and

d)      every person who authorised the issue of the prospectus.

S.45 (2) states that "no person shall be liable... if he proves...". This means that the directors or promoters are prima facie liable there under unless they successfully avail themselves of the statutory defenses under the subsection, (i.e. they are presumed to be liable until they prove their innocence).

Posted Date: 1/12/2013 3:10:30 AM | Location : United States







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