Section 458 of the Companies Act, 2013
1. Text of Section 458 (in essence)
Section 458 states:
No person shall be deemed to have authorized the issue of a prospectus or be liable for any statement in it, merely because his name is mentioned as a director, promoter, or otherwise in the prospectus, unless he has consented to it in writing.
2. Key Points
a) Consent is Essential:
Simply having your name mentioned in a prospectus does not make you responsible.
You must give written consent to be held liable for the contents of the prospectus.
b) Purpose:
Protects innocent persons whose names may be included without their knowledge.
Ensures that liability under Sections 454, 456, etc., applies only to those who consented to sign the prospectus.
c) Persons Covered:
Directors, promoters, or any person whose name appears in the prospectus.
Liability arises only if they have authorized or consented to the prospectus in writing.
d) Relation to Other Sections:
Works as a safeguard alongside Sections 454 (misstatement) and 456 (fraud) to prevent wrongful attribution of liability.
3. Key Legal Principles
Protection of Innocent Individuals:
Prevents misuse of a person’s name for issuing a prospectus.
Written Consent Requirement:
Without written consent, a person cannot be held liable for any civil or criminal consequences under the Companies Act.
Intentional Authorization:
Liability arises only if the person knowingly authorized the issue of the prospectus.
4. Example to Understand
Suppose a company issues a prospectus and mistakenly lists Mr. X as a director in the prospectus:
If Mr. X never consented or signed the prospectus, he cannot be held liable for any misstatements or fraudulent claims.
Only the persons who gave written consent and signed can be held responsible under Sections 454 or 456.
In short:
Section 458 Companies Act, 2013 ensures that liability for statements in a prospectus attaches only to those who have given written consent.
It protects innocent persons from wrongful legal consequences.
Acts as a safeguard against misuse of names in company prospectuses.
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