A public company in the mining business made an issue of its shares to the public at sh.10 per share.
In the prospectus, the company stated that ” the company has discovered a booming market in the European Union member countries for its minerals”
The company had never marketed its minerals in the European Union member countries. Timothy, without reading the prospectus applied for shares and was allotted 1000 shares at sh.10 each.
Mary read the prospectus, applied for the shares but was not allotted any shares. Later on, Mary bought 2000 shares at the stock exchange at sh.25 each.
Peter, an old shareholder in the company owned 500 shares even before the company made the issue. He is disappointed with the price at which the new offer for sale was made claiming that this had destabilized the price of the company’s shares.
Required:
a) Explain the legal principles applicable in the above case and advise Timothy, Peter and Mary. (12 marks)
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