White v Bristol Aeroplane Co [1953]

White v Bristol Aeroplane Co [1953] Ch 65 is a notable company law case that addresses the issue of issuing bonus shares and its impact on the voting power of existing shareholders, particularly preference shareholders. The central question was whether such an issuance constituted a variation of class rights.

Bristol Aeroplane Co issued bonus shares to its existing shareholders. The issuance resulted in a dilution of the voting power of preference shareholders. Preference shareholders sought a separate class rights meeting, asserting that their class rights were being affected.

The Court of Appeal held that the issuance of new shares did not amount to a variation of class rights. Sir Raymond Evershed MR, in his judgment, articulated a crucial point, stating that there is a distinction between an affecting of the rights and an affecting of the enjoyment of the rights, or of the stockholders’ capacity to turn them to account. In essence, Evershed emphasised that while the new shares did impact the enjoyment and practical exercise of voting rights, they did not fundamentally alter the legal rights of the shareholders.

This case underscores the nuanced legal perspective on class rights. Evershed's distinction recognises that certain corporate actions may influence the practical exercise of rights without constituting a direct legal variation. The judgment suggests that dilution of voting power through bonus shares might not trigger the need for a separate class rights meeting.

In conclusion, this case contributes to the understanding of corporate law concerning class rights. It highlights the importance of distinguishing between the legal rights of shareholders and the impact on their ability to exercise those rights in a practical sense. The decision reflects a balance between corporate flexibility and shareholder protection in the context of bonus share issuances.
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