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318.   Rescission of contract

Revised Laws of Saint Lucia (2021)

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318.   Rescission of contract

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    (1)   A shareholder or a debenture holder may bring, against a company that has allotted shares or debentures under a prospectus, an action for the rescission of all allotments and the repayment to the shareholders or debenture holders of the whole or part of the issue price that has been paid in respect of the shares or debentures, if the—

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      (a)     prospectus contained a material statement, promise or forecast that was false, deceptive or misleading; or

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      (b)     prospectus did not contain a statement, report or account required under this Act to be contained in it.

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    (2)   In this section—

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      (a)     “debenture holder” means a holder of any of the debentures allotted under the prospectus, whether the original allottee or a person deriving title under him or her;

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      (b)     “shareholder” means a holder of any of the shares allotted under the prospectus, whether the original allottee or a person deriving title under him or her.

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    (3)   For the purposes of this section, a prospectus contains a material statement, promise or forecast if the statement, promise or forecast was made in such a manner or context, or in such circumstances, as to be likely to influence a reasonable man in deciding whether to invest in the shares or debentures offered for subscription; and a statement, report or account is omitted from a prospectus if it is omitted entirely, or if it does not contain all the information required by this Act to be given in the statement, report or account.

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    (4)   In an action brought under this section, the plaintiff need not prove that he or she, or the person to whom the shares or debentures he or she holds were allotted, was in fact influenced by the statement, promise or forecast that he or she alleges to be false, deceptive or misleading, or by the omission of any report, statement, or account required to be contained in the prospectus.

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    (5)   An action shall not be brought under this section more than 2 years after the first issue of the prospectus under which shares or debentures were allotted to the plaintiff or the person under whom the plaintiff derives title.

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    (6)   If judgment is given in favour of a plaintiff under this section, the allotment of all shares or debentures under the same prospectus, whether allotted to the plaintiff, or the person under whom he or she derives title, or to other persons, is void; and judgment shall be entered in favour of all such persons for the payment by the company to them severally of the amount paid in respect of the shares or debentures that they respectively hold; but if any shareholder or debenture holder at the date judgment is so entered signifies to the company in writing, whether before or after the entry of judgment, that he or she waives his or her right to rescind the allotment of shares or debentures that he or she holds, he or she is deemed not to be included among the persons in whose favour judgment is entered.

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    (7)   The operation of this section is not affected by the company's being wound up or ceasing to pay its debts as they fall due; and in the winding-up of the company a repayment due under subsection (6) shall be treated as a debt of the company payable immediately before the repayment of the shares or debentures of the class in question, that is to say—

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      (a)     in the case of a repayment in respect of shares, before repayment of the capital paid up on shares of the same class, and before any accumulated or unpaid dividends, or any premiums in respect of those shares, but after the payment of all debts of the company and the satisfaction of all claims in respect of prior ranking classes of shares; and

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      (b)     in the case of a repayment in respect of debentures, before the repayment of the principal of the debentures of the same class, and before any unpaid interest or any premiums in respect of those debentures, but after the payment of all debts or liabilities of the company that this Act requires to be paid before those debentures, and after the satisfaction of all rights in respect of prior ranking classes of debentures.

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    (8)   Subject to subsection (9), it is a defence to an action under this section for the company to prove that—

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      (a)     the plaintiff was the allottee of the shares or debentures in right of which the action was brought and that at the time they were allotted to him or her he or she knew that the statement, promise or forecast of which he or she complains was false, deceptive or misleading, or that he or she knew of the omission from the prospectus of the matter of which he or she complains; or

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      (b)     the plaintiff has received a dividend or payment of interest, or has voted at a meeting of shareholders or debenture holders since he or she discovered that the statement, promise or forecast of which he or she complains was false, deceptive or misleading, or since he or she discovered the omission from the prospectus of the matter of which he or she complains.

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    (9)   An action may not be dismissed if there are several plaintiffs, when the company proves that it has a defence under subsection (8) against each of them; and in any case in which the company proves that it has a defence against the plaintiff or all the plaintiffs, the court may, instead of dismissing the action, substitute some other shareholder or debenture holder of the same class as plaintiff.

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    (10)   If a company would have a defence under subsection (8) but for the fact that the allottee of the shares or debentures in right of which the action is brought has transferred or renounced them, the company may bring an action against the allottee for an indemnity against any sum that the court orders it to pay to the plaintiff in the action.

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    (11)   Subsections (8) and (10) apply also in the case of shares and debentures of the same class as those in right of which a plaintiff obtains and enters judgment against the company under subsection (6)—

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      (a)     with the substitution in subsection (8) of references to the shareholder or debenture holder for references to the plaintiff; and

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      (b)     with the substitution in subsections (8) and (10) of references to a right for the company to have the judgment set aside in respect of the shares or debentures for references to a defence to the action.

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    (12)   This section applies to shares and debentures allotted under an underwriting contract as if they had been allotted under the prospectus.

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    (13)   This section applies to shares or debentures issued under a prospectus that offers them for subscription in consideration of the transfer or surrender of other shares or debentures, whether with or without the payment of cash by or to the company, as though the issue price of the shares or debentures offered for subscription were the fair value, as ascertained by the court, of the shares or debentures to be transferred or surrendered, plus the amount of cash, if any, to be paid by the company.

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    (14)   The rights conferred on shareholders and debenture holders by this section are in substitution for all rights to rescission and restitution in equity and all rights to sue the company at common law for deceit or for false statements made negligently; and those common law and equitable rights are hereby abolished in connection with prospectuses, but without prejudice to claims for damages or compensation against persons other than the company.

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