Issue is sanctioned by the court - allotment of shares, Business Law and Ethics

Issue is sanctioned by the court - allotment of shares:

Not less than one year has elapsed since the company was entitled to commence business.

This provision obviates the risk of a hasty or premature issue at a discount. The statutory assumption appears to be that, having been in business for at least one year, the company would most likely have published its first balance sheet and declared a dividend which could induce a greater demand for its shares.

 The issue is sanctioned by the court.

Although the grounds upon which the court is to excercise its discretion to sanction or reject the proposed issue are not spelt out, it appears that it would primarily be acting as the creditors' watchdog to protect their interests. This is so because creditors were not represented at the general meeting which passed the resolution authorizing the company to issue the shares at a discount and so the court steps in to protect their interests. If the issue of shares at a discount would adversely affect any creditor, the court would probably not sanction the issue.

The issue is made within one month after the court's sanction.

This provision acknowledges the fact that the stock exchange market is a highly fluid market. If a company's members pass a resolution authorizing an issue at a discount because of the prevailing market conditions the directors must act on the resolution before the market conditions change. The statutory assumption appears to be that the market conditions would have materially changed within one month after the court's confirmation. If the directors were to issue the shares at a discount despite the changed conditions, the issue could not be justified.

Another general meeting should be held to enable the members to reconsider their decision in the context of the changed conditions. However, the directors may ask the court to extend the time for issuing the shares at the prescribed discount if they are of the view, and the court concurs, that the market conditions have not materially changed. The flaw with this provision is that it does not provide a time limit for applying to the court for its sanction

Posted Date: 1/12/2013 3:20:06 AM | Location : United States







Related Discussions:- Issue is sanctioned by the court - allotment of shares, Assignment Help, Ask Question on Issue is sanctioned by the court - allotment of shares, Get Answer, Expert's Help, Issue is sanctioned by the court - allotment of shares Discussions

Write discussion on Issue is sanctioned by the court - allotment of shares
Your posts are moderated
Related Questions
Personal rights invaded:                    A shareholder may sue to protect from invasion their own individual rights as members.  This is illustrated by Pender v Lushington

Companys debts: In case a company is unable to pay its debts the creditors, or a creditor, may petition the High Court for an order to wind it up. During the winding up the me

Goods - Sales of Goods Even if "goods" like in common parlance has like the Act has given the word such technical meaning. Whether it provides like; "goods" consist of "all chat

Recognition of government It relates to recognition of a government of a particular State as the legitimate representative of the people of that country. The recognition of gov

Q. Show Key considerations in defining phoenix activity? In determining an appropriate definition of phoenix activity, there are a range of considerations that must be accounte

Q. International law is a law or not? It is debatable whether international law is a law or not. Law is defined as rules established by a governing authority to institute and m

John owns a 1951 Mercedes Sl that he wishes to sell. He instructs Ross to sell the car, and in return, will be paid £5,000 commission. Ross manages to find a buyer, Paul, Paul and

Legal justification - Constructive notice: The legal justification for this rule is that since the company's public documents in its file at the Companies Registry are availab

QUESTION Miss Titch Herr, a newly appointed education officer, starts her day at No Nonsense State Secondary School (NNSSS), an institution wholly subsidized from public funds

Hire-Purchase and Conditional Sale – Sales of Goods Conditional Sale is an agreement for the sale of goods like in which the purchase price or part about it is payable through