ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Marlowe Ltd makes a pre-emption offer to its members on a cash issue of new ordinary shares. Which feature of the offer is consistent with the standard rules?
A valid pre-emption offer is made in writing to all entitled members and must remain open for a minimum period. Only after that period expires can shares not taken up be offered to other persons. Excluding small holders or using a very short window breaches the rules.
- AThe offer is made in writing and stays open for a minimum period, after which unaccepted shares may be offered elsewhereCorrect
- BThe offer lapses after one day so the directors can move quickly
- CThe offer is made only to members who hold more than 5% of the shares
- DThe offer is made orally at the annual meeting and cannot be declined
Explanation
Members must be given a proper written offer that remains open for a set minimum period, so they can decide whether to take up their entitlement. Only once that period expires may shares not taken up be offered to others. Limiting the offer to large holders or making it one day long defeats the protection.
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