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The textbook gave an example:
White v Bristol Aeroplane Co Ltd 1953
The facts: The company made a bonus issue of new ordinary and preference shares to the existing
ordinary shareholders who alone were entitled under the articles to participate in bonus issues. The
existing preference shareholders objected. They stated that reducing their proportion of the class of
preference shares (by issuing the bonus of preference shares) was a variation of class rights to
which they had not consented.
Decision: This was not a variation of class rights since the existing preference shareholders had the
same number of shares (and votes at a class meeting) as before.Dear sir,
Could you please explain why the decision was like that? I don’t understand why the existing preference shareholders would still have the same number of votes as before. Doesn’t bonus issue result in reduction of voting power in each share?
Thank you sir
The preference shareholders, before the bonus issue, had (say) 40,000 votes and after the bonus issue they still had (say) 40,000 votes
So how have their rights been varied?
The judge in the case Rights and Issues Investment Trust v Stylo Shoes said (something like) “When a shareholder owns shares knowing that he is to be deprived of control, he cannot complain simply because that situation is continued”
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