ASSIGNMENT OF LAB

1. An allotted of shares in a company brought action against a director in

respect of false statements in a prospectus. The director contended that
the statements were prepared by the promoters and he had relied on them.
Is the director liable under the circumstances?
Ans. Sec.62 lays down civil liabilities for misstatements in prospectus. It renders
every Director liable for any misstatement in prospectus. Sec.62 however, lays
down the circumstances under which the director concerned shall not be held liable.
One of the pleas that the director can take is that he had reasonable ground to
believe and did up to the time of allotment of shares or debentures believe that the
statement was true. In the instant case the director can absolve himself of the
liability if he proves that he had reasonable grounds to believe and did believe that
the statement prepared by the promoters was true. he onus of proof is on the
director.
2. The promoters of a company before its incorporation enter into an
agreement with P to buy a plot of land on behalf of the company. After
incorporation the company refuses to buy the said plot of land. Has P any
remedy either against the promoters or against the company?
Ans.
The present case is related to the pre-incorporation contract. The promoters of the company usually enter
into contracts to acquire a plot which is yet to be incorporated. As such contracts are a nonexistence and the
company cannot sue or be sued on such contract when company comes into existence. So in such case P has
remedy against the promoters only. They are liable personally for those contracts that are made on behalf of the
company before it comes into existence. !en the company cannot ratify such contracts after its registration. Such
contracts are deemed to ha!e been entered into personally by the promoters.
3. The Memorandum of Association of a company was presented to
the Registrar of Companies for registration of the Registrar issued the
certificate of incorporation. The company after complying with all the
prescribed legal formalities started a business. The company
contends that the nature of the business cannot be gone into as the
certificate of incorporation is conclusive. Discuss.
Ans.The subscribers to the memorandum may choose any ob"ect or ob"ects for the purpose of their
company. There are two restrictions on the selection of #ob"ect$ for a company%
&i' The ob"ect should not include anything which is illegal or contrary to law or public policy.
&ii' The ob"ects should not also contemplate doing anything which is prohibited by the (ompanies Act.
)n applying the abo!e pro!ision in the present problem* the companys contention is wrong. Though a
certificate of incorporation is a conclusi!e e!idence of its registration* that is* it is conclusi!e e!idence as to
the fact that all requirements of the (ompanies Act for the incorporation of a company ha!e been complied
with* and that now company is a legal entity but* it does not mean that all its ob"ects are legal. +n ,owman
!. Secular Society -td.* the court held that the statute does not pro!ide that all or any of the ob"ects
specified in the memorandum* if otherwise illegal* would be rendered legal by the certificate. Therefore* the
contention of the company that the nature of business cannot be gone into after the certificate of
incorporation has been obtained is not tenable.