The prospectus which contains mis-statements or misleading statements, is called Misleading Prospectus.
Liability:
The liability may be civil or criminal.
Who are liable for mis-statement in the prospectus?
1) Every person who is a director of the company at the time of the issue of the prospectus;
2) Every person who has authorized himself to be named and is named in the prospectus either as director or as having agreed to become a director either immediately or after an interval of time;
3) Every person who is a promoter of the company and
4) Every other person who has authorized the issue of the prospectus.
Civil liability
The above persons shall be liable to pay compensation to every person who subscribes for any shares or debentures for any loss or damage sustained by him by reason of any untrue statement included therein.