Capital & Financing Cases

Question 1

Cumbrian Newspapers Group Ltd v Cumberland & Westmorland Herald

Answer 1

The claimant and the defendant were both publishers of newspapers. They negotiated a transaction whereby D would acquire one of C’s newspapers and C would acquire 10% of D’s share capital. D issued the 10% share holding and as part of the agreement under which the shares were issued amended its articles to give C certain rights including pre-emption rights over other ordinary shares. The purpose of such rights was to enable C as a shareholder to prevent a takeover. Subsequently, a few years later D called a meeting to pass a special resolution to cancel the articles which gave special rights to C. C sought a declaration that the rights were class rights which could not be cancelled without his consent. 
It was held that the declaration was granted. The special rights granted were rights which could not be varied or cancelled without C’s consent

Question 2

White v Bristol Aeroplane Co

Answer 2

The company made a bonus issue of new ordinary and preference shares to the existing ordinary shareholders who alone were entitled to participate in bonus issues under the articles. The existing preference shareholders objected on the basis that this reduced their proportion of the class of preference shares and was a variation of class rights to which they had not consented
It was held that the bonus issue is not a variation of class rights since the existing preference shareholders had the same number of shares as before

Question 3

Greenhaugh v Arderne Cinemas Ltd

Answer 3

The company had two classes of ordinary shares, 50p and 10p shares, with every share carrying one vote. A resolution was passed to subdivide each 50p share into five 10p shares, thereby multiplying the votes of that class by five. 
It was held that the subdivision of shares is not a variation of class rights. The rights of the original 10p shares had not been varied since they still had one vote per share as before

Question 4

Ooregum Gold Mining Co of India v Roper

Answer 4

Shares in a company which had nominal value of £1 were trading at a market price of 12.5p. In an honest attempt to refinance the company, new £1 preference shares were issued and credited with 75p as paid up. The company subsequently went into liquidation.
It was held that the holders of the shares were required to pay a further 75p per share