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Question
Study the following case/situation and express your opinion:
A Company plans to offer Rights Issue.
a) Which document must it send to its shareholders for offering the Rights Issue?
b) Instead of Rights Issue, if the company wants to issue shares to the public, which document must it issue for inviting the public to subscribe for it?
c) Name the document which is called as incomplete prospectus.
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Solution
(a) A document (Prospectus) called ‘Letter of Offer’ a company must send to its shareholders for offering the Right issue.
(b) If the company wants to issue shares to the public, for inviting the public to subscribe for it. the company has to issue Abridged prospectus.
(c) Red herring prospectus is called an incomplete prospectus.
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RELATED QUESTIONS
Select the correct answer from the option given below and rewrite the sentence.
_________ acts are void or legally ineffective.
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_______ is an incomplete prospectus.
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Articles of Association is subordinate to Memorandum.
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Entrenched Articles cannot be easily altered.
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Actions can be taken against a company or its officers for misstatements in prospectus.
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Letter of offer is issued at the time of Rights Issue.
Find the odd one.
Explain the following term/concept.
Liability clauses
Study the following case/situation and express your opinion:
The Articles of a company stated that while borrowing any money from outsiders. The document must have the signatures of the Managing Director (MD) and any one of the directors. The Articles of Association clearly stated the procedure to be followed while borrowing money. The Managing Director did not follow all the procedures but still borrowed money from Mr. X. Mr. X assumed that the MD has followed the required procedures:
(a) Can the MD be held punishable for his act?
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The doctrine of Indoor Management protects outsiders who are unaware of the correctness of internal proceedings of a company.
