What is the purpose of a Directors' Circular?

• A. To announce earnings results of the company
• B. To recommend action regarding a take-over bid
• C. To disclose insider trading activities
• D. To inform the public of market conditions

Answer: (B)

The purpose of a Directors' Circular is primarily to recommend action regarding a take-over bid. This document is issued by a company's board of directors to its shareholders in the context of a proposed acquisition. It provides essential information about the offer, including details on the terms and conditions, and offers insights into the board’s perspective on whether shareholders should accept or reject the bid. This type of communication is crucial as it directly impacts shareholder decisions and the overall outcome of the takeover process.

The other options do not align with the specific purpose of a Directors' Circular. For instance, while announcing earnings results is important for a company, it is typically done through earnings releases rather than a Directors' Circular. Similarly, insider trading activities are commonly disclosed in compliance reports or regulatory filings rather than through a recommendation for action in the context of a takeover. Lastly, while informing the public about market conditions is essential for maintaining transparency and investor confidence, it falls under different types of financial disclosures or reports, not specifically within the realm of a Directors’ Circular focused on acquisitions.