Shares and Business Law: Allotment and Registration

Sh ars and Business Law Allotment and RegistrationQuestion 1T here be m any things that Jim go forth induct to consider but at that place atomic number 18 three main steps that he will shake to follow. Most of the delegacy for issue of shares come from the articles of association (table A) with rest being contained in the Companies act 1985. First he and the gild would have to decide to issue the shares and set the wrong of issue. Secondly, some person or persons must agree with the connection to take the shares. Third, in implementation of that contract, those persons must take the shares and be made members of the company.Section 80A of the Companies Act 1985 provides that direction shall non exercise any power of the company to allot shares in the company or rights to subscribe for, or convert into, shares in the company unless they are authorised by the company in general meeting or by the companys articles. Any berth, whether given in the articles or by resolution mu st state the maximum number of securities which gutter be issues under it and the date at which the authority will expire. Contravention of the arm does non affect the validity of any allotment made1 but any director, who knowingly and wilfully permits it, is liable to a fine2.Jim will have a plectron of various methods whereby the companies securities can be offered to the humankind. Here we can see that he has engaged the services of an issuing house.The next thing Jim would have had to consider would have been whether or non there were any pre-emptive rights that is where there circumstances that existed that meant that existing shareholders rather than the general public should be offered the shares first3. This did obviously non arise here as Jim was a sole trader.Jim will then have to make a decision as to the price at which the securities should be issued. This is a tricky decision to arrive at as if the shares are set to low so that the issue is heavily everywhere-s ubscribed, the company (and keeping house) will be discontent were as if they are set too high so that much of the issue is left with the underwriters it is they that will be uhappyNext Jim will have to disseminate with Allotment and Registration of the new share issue. The process of becoming a shares holder is a two-step one, involving fist a contract and then readjustment of the member. The processes of agreement and registration will be achieved with little formality and without the issue of allotment letters. If someone wants to become a shareholder and the company wants him to, he will be entered on the take and issued with a share certificate.Allotment does not make a person a member of the company. Entry in the register of members is also need to give the allotee legal title to the shares. Section 22(2) says explicitly that a person who agrees to become a member of the company and whose name is entered on the register of members is a member of the company4Question 2In ad dition to compliance with the gunpointed victual that are contained in the listing rules, s80 (1) of the Financial service and Marketing Act 2000, implementing Article 21 (1) of the inclination Directive, adds an important sweeping up, awaitment that the course catalogue submitted to the FSA shall contain all such study as investors and their professional advisors would reasonable require and middling expect to find for the purpose of assessing the financial position of the issuer and the nature of the securities on offerThose who issue a prospectus, holding out to the public the great advantages which will accrue to persons who will take those shares and inviting them to take shares on the faith of the representations therein contained, are bound to state everything with exact and scrupulous accuracy and not only to abstain from stating as fact that which is not so, but to omit no one fact within their knowledge, the human beings of which might in any degree affect the natu re, or extent, or quality of the privileges and advantages which the prospectus holds out as inducements to take shares5To determine whether or not the information that a rival caf chain had commenced legal proceedings against the company alleging that the design of its outlets and products infringed their bright property rights should have been disclosed in the prospectus to Zara s80(4)permits postulate to be had not only to the nature of the issuer and of the securities but also to the nature of the persons likely to consider acquiring the securities, the knowledge which their professional advisers may be judge to have and to information already in the public body politic by virtue of its publication under statutory or regulatory requirements. We are not made awake of any information about Zaras advisers however the information is not information that is required to be in the public domain as a advance has been brought not actually heard. If the claim had been heard at court and been successful then it may fall in the public domain, therefore on this priming coat it is information that should have been disclosed in the prospectus.The next question that falls to be addressed as to whether Jim and JZ Horgan were persons who were liable for the prospectus and this can be determined by destination to decree 13 of the Public Offers of Securities Regulations.6 The persons responsible areThe issuer (the company)The directors of the IssuerEach person who has authorised himself to be named, and is named, as having hold to become a director, whether immediately or at a future timeEach person who accepts , and is verbalize as accepting, tariff for, or for any part of, the prospectusEach other person who has authorised the contents o f the prospectus or any part of it andThe offeror of the securities and its directors where It is not the issuerIt can therefore be seen that both Jim an JZ Horgan will be persons who are responsible to Zara and may therefore b e required to indemnify her.JZ Horgan and Jim are responsible for the prospectus and are liable to pay compensation to any person who has acquired any of the securities to which it relates and suffered issue as a result of any sham or misleading disputation in it or of the omission of any matter required to be included under the Act or regulations7. The provisions do not require Zara to verbalize that she relied on the misstatement in order to establish a cause of action, but she must be able to show at least a casual link between the misstatement or omission and the loss will have to be proven. Zara has said that she would not have bought the securities had she known about the action brought by the rival company. The loss is of course the one million pound that has been salaried by the company and the resulting decrease in the value of the shares. As regards the bank, irrespective of their knowledge they will still be liable. This is because the statute does not require the ma ker of the statement to have assumed responsibility towards the claimant. Therefore Zara will be entitled to be compensated for the loss that she has suffered from.JZ Horgan and Jim could raise a defence. The defences that are available to them are contained in schedule 10 and regulation 15 and they provide persons responsible for the misstatement or omissions with exemptions. They will be able to escape liability if they can satisfy the court (a) that he reasonably believed that there were no misstatements or omissions and that he had done all that could reasonably be expected to ensure that there were not any and that, if any came to his knowledge, they were change by reversal in time or (b) that the plaintiff acquired the securities with knowledge of the falsity of the statement or of the matter omitted. Where the statement in question is made by an smart and is stated to be included with the experts consent, these rules are applied to the belief that the expert was competent a nd had consented to the inclusion of this statement. It is unlikely that JZ Horgan and Jim will be able to establish that both these exemptions apply and therefore will be considered to be liable to pay compensation to Zara.It should be noted that if for any reason this action to recover indemnity failed for any reason then Zara would be able to seek compensation against JZ Horgan and Jim in three other ways. The first would be change at plebeian law. The parking area law provides civil remedies for misrepresentations which have caused loss to those who have relied upon them8. Zara may well also have the common law option of her right to make void the contract. The common law allows , in certain circumstances , claimants to scratch out a contract entered into as a result of misrepresentation whether that misrepresentation is fraudulent , absorbed or wholly innocent. Such a right would be actionable against the company only as the company is the person with whom Zara entered the contract with. The final utility(a) option would be to make a claim for breach of contract. The advantage of establishing this would be that the misrepresentee would have a claim in damages to be open to be assess on the contractual basis, rather than the tortious basis. Therefore Zara may be able to claim for heads of damages such as the loss of the expected profit on the shares.Question 3Jims obligation under s80 (1) of the Financial Services and Marketing Act 2000, implementing Article 21 (1) of the Listing Directive, that the prospectus submitted to the FSA shall contain all such information as investors and their professional advisors would reasonable require and reasonably expect to find is a continuing obligation. down the stairs s81, if after the preparation of a prospectus but before dealing in the securities begins there is any change significant for the purposes of making an informed assessment, the company must submit to the FSA a supplementary prospectus for appr oval. If the company is not aware of the change, it is not required to comply with the obligation, but any person responsible for the prospectus who does know of the change is under a duty to notify it to the company.To determine whether or not the information that the company has just settled an intellectual property claim for 1million and that a profit warning is just about to be made should have been disclosed any purchasers of the securities s80(4)permits regard to be had not only to the nature of the issuer and of the securities but also to the nature of the persons likely to consider acquiring the securities, the knowledge which their professional advisers may be expected to have and to information already in the public domain by virtue of its publication under statutory or regulatory requirements. We are not made aware of any information about the purchasers advisers however the information is not information that is required to be in the public domain as a claim has been bro ught not actually heard. If the claim had been heard at court and been successful then it may fall in the public domain, therefore on this basis it is information that should have been disclosed in the prospectus.The next question that falls to be addressed as to whether Jim and JZ Horgan and now the company were persons who were responsible for the prospectus and this can be determined by reference to regulation 13 of the Public Offers of Securities Regulations.9 The persons responsible areThe issuer (the company)The directors of the IssuerEach person who has authorised himself to be named, and is named, as having agreed to become a director, whether immediately or at a future timeEach person who accepts , and is stated as accepting, responsibility for, or for any part of, the prospectusEach other person who has authorised the contents o f the prospectus or any part of it andThe offeror of the securities and its directors where It is not the issuerIt can therefore be seen that the company will be liable as the issuer of the securities.The company is liable for the misleading and or omission of information and are liable to pay compensation to any person who has acquired any of the securities to which it relates and suffered loss as a result of any untrue or misleading statement in it or of the omission of any matter required to be included under the Act or regulations10. The provisions do not require the purchasers to show that she relied on the misstatement in order to establish a cause of action, but she must be able to show at least a casual link between the misstatement or omission and the loss will have to be proven. The loss is of course the one million pound that has been paid by the company and the resulting decrease in the value of the shares.The phoner could raise a defence. The defences that are available to them are contained in schedule 10 and regulation 15 and they provide persons responsible for the misstatement or omissions with exemptions. T hey will be able to escape liability if they can satisfy the court (a) that he reasonably believed that there were no misstatements or omissions and that he had done all that could reasonably be expected to ensure that there were not any and that, if any came to his knowledge, they were corrected in time or (b) that the plaintiff acquired the securities with knowledge of the falsity of the statement or of the matter omitted. Where the statement in question is made by an expert and is stated to be included with the experts consent, these rules are applied to the belief that the expert was competent and had consented to the inclusion of this statement. It is unlikely that the company will be able to establish that both these exemptions apply and therefore will be considered to be liable to pay compensation to the purchasers of the shares.It should be noted that if for any reason this action to recover damages failed for any reason then the purchasers would be able to seek compensatio n against the companyin three other ways. The first would be damages at common law. The common law provides civil remedies for misrepresentations which have caused loss to those who have relied upon them11. The company may well also have the common law option of her right to rescind the contract. The common law allows , in certain circumstances , claimants to rescind a contract entered into as a result of misrepresentation whether that misrepresentation is fraudulent , neglectful or wholly innocent. Such a right would be actionable against the company only as the company is the person with whom the purchasers entered the contract with. The final choice option would be to make a claim for breach of contract. The advantage of establishing this would be that the misrepresentee would have a claim in damages to be effected to be assess on the contractual basis, rather than the tortious basis. expected profit on the shares.In consideration of whether or not Jim will be liable to those p urchasers himself the principle of limited liability should be considered. The principle of limited liability stipulates that a director/shareholder will be limited in personal liability to there shareholding, therefore on the face of it would seem that Jim is not in person liable. However, it should also be considered whether or not Jim had the actual authority to issue the shares. The reason that this question arises as when he originally issued the shares he was acting a sole trader, this is of course no longer the case and reference should therefore be made to the companies articles. If he was acting outside of his authority and not as an agent of the company it could be that he could be held personally liable for any loss which these shareholders have suffered from.BibliographyLegislationCompanies Act 1985Financial Services and Marketing Act 2000Misrepresentation Act 1967Public Offers of Securities RegulationsCasesDerry v cheep (1889) 14 App Cass 337Hedley Byrne Co Ltd v Helle r Partners Ltd 1964 A C 465New Brunswick and Canada railroad track Co v Muggeridge (1860) 1 DR SM 363Re Nuneaton Football friendship 1989 BC L C 454 CABooksBailey E, Groves H, Smith C , (2001) Corporate Insolvency Law and Practice, 2nd Edition, ButterworthsCheffins B, (1997) Company Law Theory Structure and appendage, Clarendon PressDavies P, (2002) An Introduction to Company Law, Oxford University PressDavies P, (2002) Gower and Davies Principles of Modern Company Law, 7th Edition Sweet and MaxwellGriffin S , (2000) Company Law Fundamental Principles, 3rd Edition, Harlow PressHicks A Goo, (2001) Cases and Materials in Company Law, 4th Edition,Blackstone1Footnotes1 S 80 (10) The Companies Act 19852 S80 (9) The Companies Act 19853 tally Ss89 to 96 The Companies Act 19854 See RE Nuneaton Football Club 1989 BC L C 454 CA5 Per Kindersley V C in New Brunswick and Canada Railway Co v Muggeridge (1860) 1 DR SM 3636 SI 1995/1537 as amended7 S90(1) and reg 14 (1)8 See Derry v Peek (1 889) 14 App Cass 337 The Misrepresentation Act 1967 Hedley Byrne Co Ltdv Heller Partners Ltd 1964 A C 4659 SI 1995/1537 as amended10 S90(1) and reg 14 (1)11 See Derry v Peek (1889) 14 App Cass 337 The Misrepresentation Act 1967 Hedley Byrne Co Ltdv Heller Partners Ltd 1964 A C 465The Man Who Bombed Karachi A Memoir by full admiral SM NandaThe Man Who Bombed Karachi A Memoir by Admiral SM NandaThe phonograph recording by Admiral SM Nanda, The Man Who Bombed Karachi A Memoir, is an autobiography by an Indian naval officer who retired as the Chief of Naval staff (CNS) and is often remembered for his most remarkable and vital role played during the planning and execution of maritime operations which led to the historical victory of India over Pakistan during the 1971 negate. The author, who was the then CNS during the 1971 conflict with Pakistan, is the most qualified person to bring out the various aspects of the successful operations carried out by the Indian navy on both th e Western and Eastern theatres during the conflict.The book brings out a structured narration by the author of his childhood at Manora Island off Karachi where he was born. The initial chapters of the book, takes the reader from his childhood to the youth of the author at Minora, where he studied, and on completion of his high school, worked at the Port and Pilotage Department previous joining the Royal Indian Navy (RIN) and commissioned as an acting sub lieutenant in the Royal Indian Naval Volunteer take into account (RINVR) on 11 Oct 1941.The author gives a detailed account of his experiences during his distinguished career in the Navy, which lasted 32 years and also about his subsequent promote as the CMD of the Shipping Corporation of India (SCI). The reader gets firsthand information on the Royal Indian Navy Mutiny which is brought out in great detail in Chapter 3 of the book while narrating the authors tenure at the Signal School, HMIS Talwar, at Bombay. The book also provid es brief account of the authors experiences with eminent personalities while he visited various countries during his tenures onboard various Naval ships. Chapter 9 of the book gives an insight on the evolvement of the nations capability in ship building, as the author narrates the numerous hurdles which he had to face as the Managing Director, Mazagon Docks, and how he successfully accomplished the assigned tasks.The book also provides numerous achievements of the author during his tenures as the Flag Officer Commanding Indian Fleet (FOCIF) and FOC-in-C West. Transformation of a single day celebration of the Navy day to a weeklong Navy Week celebration consisting mega events including review of the Indian Fleet by the President of India in 1969 is one among them. On page 158, the author states that, 45 warships, Indias first submarine (the Khanderi), five glide Guard ships and viii merchant ships were on parade during the fleet review on 28 Dec 1969. The reader could be confused a fter learning that the Indian Coast Guard was formally constituted only on 01 Feb 1977.The book narrates in detail, the evolvement of the 1971 conflict with Pakistan, the elaborate preparation planning and execution of the Naval power during the conflict and how effectively these culminated in the victory of the nation thereby rendering Navy a formidable force which was neglected till then. Chapters 12 to 15 of the book take the reader deeper into the conflict which offers interesting reading even to a layman with the help of simple, clear sketches and photographs. The sea battle which was fought in both Arabian sea and Bay of Bengal are discussed in detail with interesting narrations.In the section Way ahead, towards the later part of the book, the author also brings out significative measures for the future Indian Navy. It is felt that, the book has largely succeeded in providing a deep insight to the achievements of Admiral Sardarilal Mathradas Nanda(Retd.) PVSM, AVSM. The reade r however may derive a feeling that, the author has also endeavored, to a certain extent to clarify certain details pertaining to his reputation, especially his post retirement life.