Case 2:

Aust. Co Ltd is a new technology company registered in Australia. The decision was taken to float the company and a prospectus/disclosure document was issued in March. The prospectus contained a claim that forecast the doubling of earnings in the next three years. This was confirmed by the merchant bank MAC Bank Ltd who also advised on the fundraising. John was appointed a director of Aust. Co Ltd just before the prospectus was issued and was not involve its preparation. He is concerned that the forecast in the prospectus was overly optimistic. Two years down the track the company's share price has dropped after a fall in its earnings. Many investors are angry.

Question:

1. Give definition of the potential liability.
2. Advise John of the potential liability that he and the company may face under the Corporations Act 2001. Also advise John of any defenses that may be available under Corporations Act 2001.