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Sir there are 2 things both relating to the allotment of shares. The first one is that If the articles of association of company allows a director to allot/issue 1000 shares and he ends up in issuing the 2000 shares i.e more than allowed by the articles (i.e unconstitutional act) but the purpose for that allotment of shares was to raise finance for the company now will it be still considered as void or not? The second issue that I came up with was that if a director issued shares within the limit identified in the articles (<1000 shares in my example above) , say for example he issues 800 shares to raise finance for the company so this is not a void act as he had issued shares by remaining within the limits and for the appropriate purpose(i.e, to raise finance) but what if these 800 shares were allotted to his own relative despite his purpose was to raise finance?
I believe that, in your first scenario, the shareholders would be able to ratify the director’s acts even though the action lay beyond the director’s powers and beyond the constitution’s limitations
In the second scenario, again I believe that ratification would be possible.
But a lot depends upon all sorts of factors. For example, is the company public or private? If private, what percentage of shares is held by the individual wrong-doing director? Were the shares in scenario two offered generally to other people besides the relative? Were the other members of the board aware of the director’s actions?
It’s a question that you have raised for which I can offer no definitive answer
Sorry 🙁
OK?
I don’t think that you need to look any closer at this issue! I believe that my post is correct and is most likely more than any detail that you are ever likely to need.
OK?
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