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

Employment relations tribunal, QUESTION 1 Explain the composition and f...

QUESTION 1 Explain the composition and functions of the following institutions- (i) Employment Relations Tribunal (ii) Commission for Conciliation and Mediation QUEST

What are the limitations imposed on banks by the banking act, QUESTION 1 ...

QUESTION 1 (a) Under which circumstances can banking information on customers be disclosed and at the same time not breaching the confidentiality clause of the Banking Act (

Constructive notice - registered office, Doctrine of "Constructive Notice":...

Doctrine of "Constructive Notice":  The doctrine of "constructive notice" is a rule of company law to the effect that a person transacting business with a company is taken to

The essential requirements of a valid asset protection trust, QUESTION 1 ...

QUESTION 1 Discuss the position in UK with respect to the Capital Maintenance Doctrine. QUESTION 2 (i) What are the essential requirements of a valid Asset Protection T

Joint negotiating panel, QUESTION 1 (i) What are closed shop agreements...

QUESTION 1 (i) What are closed shop agreements and whether there are any legal remedies if such agreements do exist? (ii) Industrial relations are the relationships between

Sale of goods, Sale of Goods However in US Law relating to the sale an...

Sale of Goods However in US Law relating to the sale and purchase of goods is such contained in the Sale of Goods Act like cap 31. Therefore the Act is a reproduction of Goods

Relate the military and economic power with each other, Relate the military...

Relate the military and economic power with each other The balance of military and economic power of equilibrium is therefore desirable. A balance of power is a pre-requisite f

What are the ways by which states create international law, Different ways ...

Different ways through which States create International law There are different ways through which States create International law. International conventions mentioned under a

When was international criminal court for rwanda established, When was Inte...

When was International Criminal Court for Rwanda established Moreover, in early 1990s the International Criminal Tribunal for Yugoslavia (ICTY) was established under UNSC Resol

Describe the function and structure of iaea, Describe the function and stru...

Describe the function and structure of IAEA The function and structure of IAEA is defined in IAEA statute. IAEA has three main bodies: Board of Governors, General Conference a

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