Issue of additional preference shares, Business Law and Ethics

Issue of additional preference shares:

In the Bristol Aeroplane Case it was said of the issue of additional preference shares that:

                   "the existing preference shareholders will be in a less advantageous position on such occasions as entitle them to register their votes whether at a general meeting of the company or at separate meetings of their own class.  But there is to my mind a sensible distinction or a distinction, between an affecting of the rights and an affecting of ... the capacity to turn them to account".

It is a sensible or practical distinction because many decisions taken in the course of the company's business might affect the value of the shareholders' rights. For example, suppose that a company has two businesses: one is a dependable source of profits sufficient to provide for the preference dividend but those profits are a poor return on capital employed.  The directors then decide to sell that business at a high price in order to reinvest the proceeds in expanding the company's other business which offers prospects of long-term capital growth but very little immediate profit.  The position of preference shareholders would be affected since there may no longer be sufficient profits to cover their dividend.  But it would not be appropriate that they should have a veto (under variation of rights procedure) or an opportunity to apply to the court for a veto on what is essentially a question of commercial strategy.  It would probably be better to limit the constraint of variation of rights procedure to clear-cut and direct alteration of class rights, e.g. a reduction in the rate of preference dividend from, say, 8% to 6%.

Posted Date: 1/15/2013 3:09:41 AM | Location : United States







Related Discussions:- Issue of additional preference shares, Assignment Help, Ask Question on Issue of additional preference shares, Get Answer, Expert's Help, Issue of additional preference shares Discussions

Write discussion on Issue of additional preference shares
Your posts are moderated
Related Questions
Question 1: Analyze the contribution and role of logistics in the provision of good customer service. Question 2: Discuss the case for and against using in-house or t

Question 1 A contract comprises od reciprocal promises. In the contract of sale who is an unpaid seller? Describe the remedies for breach of contract under Sale of Goods Act, 1930

Determine the focal point for coordination The focal point for coordination is point C, which is the unique symmetrical Pareto efficient outcome. Compared to this outcome the N

Recovery of Possession of Goods However below S.15 where two-thirds or more about the hire-purchase price has been paid the owner is such precluded from enforcing the rights a

Explain the sovereign of state immunity Immunity relates to the sovereign of state immunity and act of state doctrine. This is the most complicated immunity available and relat

Games nations play Game analogy can be used to get the idea because the principal players, states reject any higher authority. Each state, take any player in a competitive game

Question : This is an extract of the Mauritian Patents, Industrial Design and Trademarks Act 2002. 12. Patentable inventions (1) An invention shall be patentable under

QUESTION The vision of a modern and efficient Public Service is to ensure good governance and achieve excellence in the delivery of public services (a) Define good governance

(a) How will you plan to establish your own business? (b) What are the merits and demerits in owning a business? (c) What are the aspects you have to think in establishing an