Company issues shares to defeat a takeover

This topic has 5 replies, 2 voices, and was last updated 7 years ago by MikeLittle.

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July 12, 2015 at 8:47 pm #260648
Chloe
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I’ve just come across this on your F4 Global analysis (covers up to Dec 2013).

There was a question on: Company issues shares to defeat a takeover

Please can you explain how this would work?
July 13, 2015 at 6:46 am #260661
MikeLittle
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Shareholders have to vote in favour or against accepting an offer from another company to buy the shares of their company. Where the directors believe that the shareholders will vote in favour of the takeover and the directors don’t want the takeover to go ahead, they could issue extra shares to their friends.

Then, when the vote takes place, the directors and their friends will vote against and defeat all those votes cast in favour

Ok?
July 13, 2015 at 9:01 pm #260709
Chloe
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Does this not count as ‘rigging’ the vote? I am assuming not as it must be legal.
Are there any restrictions on who the shares can be sold to?

Presumably if there were other major decisions that were due to be made affecting the company they could do the same thing to gain the majority vote.

Does the rule of is it in the best interests of the company as a whole apply (as per changes in articles)? Otherwise the situation can continue to be manipulated.
July 13, 2015 at 9:36 pm #260718
MikeLittle
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No, you’re correct, it IS rigging the vote and that’s why now there are laws to protect against it happening

Read the cases Bamford v Bamford and Hogg v Cramphorn
July 13, 2015 at 10:20 pm #260733
Chloe
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Oh I don’t remember coming across these laws. Can we be examined on them?
I haven’t gone over the shares part of the syllabus again yet (in case I missed this)

I will read them tomorrow, I have flexed my hours at work so I am starting earlier in the mornings so should try and get an early night.

Thanks for pointing me in the right direction though!
July 14, 2015 at 9:21 am #260747
MikeLittle
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You’re welcome
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