Civil prospectus liability under the laws of Germany and South Africa

Civil prospectus liability is the liability for a prospectus which is published in the context of issued securities on the primary market. Both the German and South African legal systems protect investors who are induced into investing by incorrect prospectuses. Chapter 4 of the Companies Act 71 of 2008 contains rules, in s 104 and s 105, which set out the prospectus liability of directors, experts, and others. German law provides comparable provisions. The differences between the two systems become apparent in the detail. South Africa’s statutory prospectus liability clearly sets out the liability of experts and focuses mainly on the personal liability of directors. The German law has traditionally referred to unwritten legal principles in respect of experts. What both legal systems have in common is that the mutual interests of potential plaintiffs and defendants are not exclusively regulated by statute law, and that both pursue a balanced form of investor protection. This article aims to contribute to the future harmonisation of both legal systems in order to facilitate cross-border investments.