Clarifiation on open offer

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Pravin Mishra (Querist)
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30 October 2012 Dear Sir,

There is one Company in which the past promoters of the Company had triggered the OPEN Offer but they did not made the open offer to the shareholders and now they are no more the promoters of the Company and now the Company is going to be taken over by new Individual and he is making an open offer.

My query in this regards is that whether the New Individual is liable for the default made by old promoters or old promoters are liable or the Company is liable for the same and if the new promoter is liable then what are the things he needs to do to rectify the same.

Kindly cite any relevant case laws clarifying the same, If any.

Ajay Mishra

Ajay Mishra (Expert)
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31 October 2012 Hi

The Companies Act, 1956, contains no provisions regarding duties of the promoters. Section 62,63 and 542 only impose liabilities of promoters for untrue statement in the prospectus and fraudulent trading.

In Gluckstein v. Barnes (1900) A.C. 240 it was held that where a promoter makes some profits in connection with a transaction to which company is party and does not make full disclosure of his profits, the company has the right to affirm the contracts and promoter should handover his profit to the company.

The the new promoter will not be liable for any act of old promoters.