The director of Transatlantic Corporation issued a prospectus inviting loans from the citizens and stated that...

The director of Transatlantic Corporation issued a prospectus inviting loans from the citizens and stated that the proceeds would be judiciously deployed to extend the business and improve the buildings. But the evidence showed that the company intended to use the money to pay existing debts. The money was lent to the Company because of the statement as mentioned inside the prospectus.

REQUIRED: Write your opinion whether there is a case of misrepresentation or not and justify your position

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Expert Solution

the company is clearly abide by law to execute the dealing as prescribed in the prospectus.

in this case,the prospectus indicated that the funds raised would be utilized toward the development work and extension of the business by addition in new building,it nowhere stated that the funds would be utilized towards repayment of loan and debt and moreover none of the investor was aware of it.

as a result this is a case of mis-presentation.

justification-

firm was planning to repay the existing debt by the funds raised from public,

this statement shows that the firm was not capable to repay its debts earlier by itself and thus it has to use the public's fund and that too without their proper consent.
this method of repayment of loan shows the insecurity and vulnerability of the company.
people have invested in the company due to the better and prosperous business ethics and commitments made to them.

Rahul Sunny answered 6 months ago

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