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In relation to allotment of shares in a company, discuss the legal position in each of the following situations: (i) Sarah applied for 4,000...

      

In relation to allotment of shares in a company, discuss the legal position in each of the following situations:
(i) Sarah applied for 4,000 shares in a public company known as ABC Ltd. She was allotted only 2,000 shares. She intends to sue the company.

Advise Sarah.

  

Answers


Martin
(i) This problem is based on allotment of shares. In this case Sarah had applied for 4000 shares but ABC Co. Ltd. allotted her 2000 only. Can Sarah sue the company? The answer to this question is emphatically no for the following reasons:

-Sarah's application for shares was an offer to the company which it was not bound to accept but accepted by allotting her 2000 shares. If the allotment




letter was posted, the contract was concluded on postage (Household Five Insurance Co. Ltd. V. Grant).
- Company prospectuses always provide that the company is not bound to allot the quantum of shares applied for. Since ABC Co. Ltd. is a public company there must have been a prospectus inviting prospective investors to apply for the shares.
- Since an allotment is an appropriation of a number of shares Sarah is bound to take up the number allotted to her.
- My advice to Sarah is to take up the shares allotted and drop the threat to sue the company. In any event she can always dispose them off.


marto answered the question on February 7, 2019 at 07:54


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