CHAPTER VII

OFFERS FOR SALE AND KINDRED MATTERS

Offers for
sale under
8. 38.

UNDER the law in force prior to the Companies Act, 1928,
it was a common practice for a company to accept the offer
of a single subscriber for the whole of an issue of shares or
debentures, leaving the subscriber to make an offer for sale
of such shares or debentures to the public. Such offer for
sale was not a prospectus within the Companies (Consolidation)
Act, 1908, and accordingly none of the provisions of that Act
as to prospectuses or as to the liability of directors for mis-
statements in a prospectus applied to such offer for sale. The
only remedies open to a purchaser in the event of his being
misled by some misrepresentation in the offer for sale were
(a) rescission if he discovered the truth while rescission was
possible, and (b) an action for deceit if he could prove that the
misrepresentation had been made fraudulently. Under the
new law (see s. 38 of the Companies Act, 1929) these remedies
are preserved and it is further provided that where a company
allots or agrees to allot any shares in or debentures of a
company with a view to all or any of such shares or debentures
being offered for sale to the public, the document by which
such offer for sale is made shall for all purposes be deemed
to be a prospectus issued by the company. Accordingly
s. 34 (as to filing) s. 35 (1) and the Fourth Schedule (as to
particulars to be included in prospectus), s. 35 (2) (as to the
invalidity of a waiver clause), s. 36 (as to restrictions or
alterations of terms of contracts mentioned in the prospectus),
and s. 37 (as to the liability of directors, etc., for statements
in a prospectus) will apply to such an offer for sale.

In addition to the matters required by s. 35 to be included in
a prospectus the offer for sale must state [see s. 38 (3)] (i) the
net amount received or to be received by the company in
respect of the shares or debentures to which the offer relates,
and (ii) the place and time at which the contract for the
allotment of such shares or debentures may be inspected.
Under s. 38 (2) the fact that the offer for sale of the
shares or debentures is made within six months after