Civil liability : If any person who has invested in a company relying upon the published prospectus of a company sustains loss, he may initiate civil proceedings against the company for getting compensation for his loss and the company is liable to pay amount of damages to him. This is called civil liability. A person responsible for this fraudulent activity is liable to punishment. In short, civil liability means, responsibility to compensate the financial loss, due to misrepresentation in the prospectus. Following persons are responsible to compensate the same:
(i) The persons who were directors of the company at the time when prospectus was published.
(ii) The directors who have consented to put their names in the prospectus.
(iii) The promoters of the company.
(iv) The officer authorized by the company to publish the prospectus.
(v) Person whose name is mentioned for giving opinion as an expert in the prospectus.