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Unexpected Share Offers
Although it is not illegal to make an unsolicited offer to buy someone's shares, it is against the law to mislead or deceive shareholders into accepting an offer. Also, the offer must comply with strict legal requirements, including the prohibition against misleading or deceptive or unconscionable conduct.
Under the current laws a person who makes an unsolicited offer to buy your shares off market for a certain price must give you:
- a written statement setting out the market value of those shares on the day the offer is made; and
- a minimum of one month in which to accept the offer.
A failure to disclose the market price attracts a fine of $22,000 or two years' jail for each breach for individuals and a maximum fine of $110,000 for companies.
Often these unsolicited offers are made at a price below the current market price. Under the current laws, these offers have to tell you the current market value of your shares. This means that you will be able to judge the value of the offer for yourself.
We have found that inexperienced or elderly shareholders, or those under immediate financial pressure, are most at risk of signing away their shares without carefully reading the offer and taking the time to make a few important safety checks.
Safety checks to protect you from un solicited share offers:-
1. Who is making the offer?
Read the offer carefully to see exactly who is making it. Some offers have used official looking letterhead, or names that sound like your company or a stock exchange, and may be sent at the same time as a company's own letters to shareholders. If you're not sure, phone your company's investor relations department to double check. You can also check the company's details through our National Names Index.
2. Why is the offer being made?
Naturally, the company or person offering to buy wants to make money. Perhaps there is public information about something that is expected to happen to your shares that you may not know about. For shares traded on the Australian Stock Exchange (ASX), check company announcements on the ASX website www.asx.com.au, or talk to a stockbroker in case you have lost touch with important news that's been released to the market.
3. Do you really need to sell?
Unless you really need the money now, you may do better by holding on. Consider what the shares are worth now, what they may be worth in the future. If you do need the money, consider all of your options.
4. What's the market value?
Get an up-to-date share price and compare it with the price being offered. Market prices can change daily. Any unexpected share offer you receive must quote the current market value as it may be out of date.
5. How much is the offer really worth?
Watch out for two types of 'low-ball' offers. The first type offers significantly less than the market value. The second type offers to pay you by instalments spread over many years. With this offer, even if the total offer price is higher than the present market value, the many years you may have to wait for all your instalments means you usually get far less than selling on the market.
6. Compare the cost of selling on the market
Even if you hold only a very few shares, you can still sell through a stockbroker. Non-advisory brokers will sell the shares for about $55-65 over the phone, or about $30-45 over the Internet.
