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Question
Value Based Question
Mr. B the financial Manager of ABC Company purchases 100 shares of the Company just before the rights issue was announced. Is the behaviour of the manager ethical? What would you do as a legal advisor of the company?
Solution
- Yes, the behaviour of the manager is unethical because rights issue is a method of raising additional finance from existing shareholders by offering securities to them on prorate basis i.e. giving them a right to a certain number of shares in proportion to the shares they are holding.
- As a legal advisor of the company, I advice that he should not be given that right of extra shares.
- As a manager his responsibility is to develop and analyse information
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