Question:
XYZ Co. Ltd plans to sell 40% of its shares. Two minority shareholders, Mr. A and Mr. B, have expressed interest in acquiring these shares. In order not to favour any party an invitation to tender, containing the following terms, was sent to both potential buyers:
I. Tenders are single offers for all the shares.
II. Payment to be effected in full within 30 days as from the date of the opening of the tenders.
III. Tenders are to be sent at the registered address of the company on the 30th of May 2010 at 3.00 p.m. at latest. Any tender sent after the prescribed date and time shall not be considered.
IV. The company undertakes not to communicate any information about the offer made by whichever party before the above date and time.
V. The company confirms that if any offer made by any party is the highest offer received by us, the company undertakes to bind itself to accept such offer provided that such offer complies with the above terms, (I - IV).
Both shareholders (Mr. A and Mr. B) complied with the conditions (I - IV) and on the 30th of May 2010 at 3.00 p.m. the tenders were opened. The bid of Mr. A was Rs 5 Million and that of Mr. B was worded as follows:
"Rs 4.5 Million or Rs 100,000 above the highest bid".
(a) Show the legal nature of the above invitation to tender.
(b) Show the validity of the bid made by Mr. B.