401. False and misleading statement

Question 1

401. False and misleading statement

Answer 1

General overview
[401.01] This section is designed to prevent a corporation from making misleading and false statements in relation to its capital in any advertisement, circular or publication, or any person from making false and misleading statements including financial statements in any report, return, certificate or other document as required by the Act. This section refers to documents “required by or for the purposes of this Act” which means that it will not cover agreements, conveyances, debentures, or security instruments which are made between the company and the counterparty pursuant to contract or other written law.

Question 2

Knowingly and wilfully authorise

Answer 2

[401.02] Subsection (1) provides that a corporation shall not misrepresent the amount of its capital, or state the amount of capital or subscribed capital in any advertisement, circular or publication more prominently than the amount of its paid-up capital or amount of any charge on uncalled capital. Every officer who knowingly authorises, directs or consents to such advertising, circulation or publication shall be guilty of an offence. Subsection (2) casts a wider net over any person who wilfully makes or authorises the making of a false or misleading statement or the omission of any matter or thing in any return, report, certificate, balance sheet, financial statements or other document, whereby he shall be guilty of an offence and shall on conviction be liable to a fine not exceeding $50,000 or imprisonment not exceeding two years or both. This extends to the lodging or filing of any document with the registrar by a person who knows the document to be false or misleading in a material respect: s 401(2A).

Question 3

Voting deemed as authorisation

Answer 3

[401.03] A person who at a meeting votes in favour of the making of a statement under subsection (2) shall be deemed to have authorised the making of that statement: s 401(3). This subsection is significant to officers who vote in favour of the financial statements at the general meeting or board meeting as they shall be deemed to have authorised the false and misleading statements stated therein, and guilty of an offence under this section. Note: any officer who has doubts of the veracity of the statements in the financial statements or any report, etc., should not vote in its favour at a meeting (see s 157(1) of the Act).