On 1st January, 2018, Parentsgold Ltd, a new and promising company had its prospectus published and on 3rd January 2018, Frank Larry sent an application for GH¢100,000 worth of shares in Parentsgold Ltd. On the same 3rd January, Abena Manu submitted an application for GH¢50,000 worth of shares but on 8th January, 2018, she sent a mail revoking her application. Both applicants remitted the requisite application moneys on the day of their application.
Due to lack of a quorum, the Board of Directors of Parentsgold Ltd could not meet to consider the applications and allot shares until 15th September, 2018. Frank Larry was informed on 16th September, 2018 that his application had been accepted and that GH¢100,000 worth shares had been duly allotted to him but he wrote back refusing the allotment.
Required:
Advice the parties of their rights, if any. (20 marks)
View Solution
The parties are Frank Larry, Abena Manu and the Parentsgold Company
Abena
Abena withdrew her offer or revoked it within an allowed waiting period of ten days from the date of the publication of the prospectus.
- Section 281 (1) explains “the waiting period” to mean a period of ten days after the first publication of a registered prospectus or such longer period as may be stated in the prospectus as the period prior to the expiration of which applications, offers or acceptances in response thereto will not be accepted or treated as binding.
- Section 281(2) of the Companies Act, 1973 (Act 179) clearly lays it down that any application, offer or acceptance by any person in response to an invitation to the public in respect of any securities of any public company shall be revocable by such person at any time prior to the expiration of the waiting period. Abena acted within her rights and her withdrawal cannot be opposed by the company in any way.
(2 points @ 3.5 marks each = 7 marks)
Frank - The case of Frank Larry is not straightforward but here, candidates should be guided by the principle of the law of contract which states that an offer must be accepted within a reasonable time, where no particular period is stipulated for acceptance. Where an offer is not accepted within a reasonable period, it is deemed to have lapsed.
So the period taken by the company to accept Frank Larry’s application was over 8moths and during that time, no effort seemed to have been made to get Frank to agree that his offer remained active. In the circumstance, Frank’s application should be deemed to have lapsed. The fact that his application money remained with the company for over 8months does not give the company rights against him and his refusal must hold.
(2 points @ 4 marks each = 8 marks)
Parentsgold Ltd
- It appears the company has no rights against either Frank or Abena.
- The company is obliged to refund the application moneys paid by both applicants because Abena validly revoked her offer and there was a lapse in the offer made by Frank Larry.
- The applicants may by court order demand some interest on the monies.
(2 points @ 2.5 marks each = 5 marks)