Issue of additional preference shares, Business Law and Ethics

Assignment Help:

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%.


Related Discussions:- Issue of additional preference shares

Give advice on given arrangement, Ben sold clothes at a market stall on wee...

Ben sold clothes at a market stall on weekends for a number of years. Two years ago business was very poor and Ben was forced to cease trading. Ben sold all of his remaining stock

Principle of statutory provisions, Principle of statutory provisions: ...

Principle of statutory provisions: Most of the cases in which the principle has actually been applied appear to fall within one of the following two classes:- 1. Where the

Variation of class rights, Variation of class rights: It is only neces...

Variation of class rights: It is only necessary to follow the variation of class rights procedure (and a dissenting minority can only apply to the court for cancellation)  if

Business and social agreements, Business and Social Agreements Busin...

Business and Social Agreements Business Agreements Therefore is a rebuttable presumption that parties intended generate a legally enforceable agreement to example in Cr

What is udhr, What is UDHR UDHR is therefore, considered as a source of...

What is UDHR UDHR is therefore, considered as a source of international law relating to human rights. Apart from UNGA-responsible for issuing resolutions, the decisions of the

Effectiveness of challenge and appeal mechanisms, Question 1: Taking th...

Question 1: Taking the case of Mauritius, in the machinery of government, the Procurement Policy Officer is the central organ of the Government that regulates the procurement

Successfully sue michael in negligence, It was late at night and very wet a...

It was late at night and very wet and, rather than wait for a taxi to take her home, Anna was only to happy to accept a lift from Michael. He smelt strongly of alcohol and had trou

Strong and weakness of acts of parliament, Strong and Weakness of Acts of P...

Strong and Weakness of Acts of Parliament: There an Act of Parliament may be said to possess the giving advantages: as; (i) Democratic in nature Now here it is democrati

Country strategy in harmonising national, Country Strategy in harmonising n...

Country Strategy in harmonising national It is proposed that the OMC should enhance the role of such Country Strategy in harmonising national and EC aid programmes. The OMC wi

Appointment of directors, Appointment of Directors: In the absence of ...

Appointment of Directors: In the absence of other provisions in a company's articles, the directors of the company would be appointed in accordance with the following provisio

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd