White v Bristol Aeroplane Co [1953] Ch 65

Facts

• The dispute involved White and the Bristol Aeroplane Co regarding the issuance of new preference shares.
• The new shares did not alter existing preference shareholders’ dividend rights but could potentially dilute their voting influence.
• Company articles outlined different share classes and their associated rights.
• Existing preference shareholders argued that the issuance of new shares affected their class rights.

Issues

1. Whether the issue of new preference shares, which did not alter dividend rights but could affect voting power, constituted a variation of class rights.
2. What defines a 'class right' under company articles and whether general shareholder rights can be considered class rights.
3. What procedural requirements must be followed to validly alter class rights under company law and articles.

Decision

• The Court of Appeal held that issuing new preference shares did not vary the class rights of existing preference shareholders, as their specific dividend rights remained unchanged.
• The Court determined that class rights refer only to specific entitlements attached to a defined class of shares, not to general rights shared by all shareholders.

Legal Principles

• Class rights must be expressly conferred on a defined group of shares in the company’s articles and be distinct from rights shared by all shareholders.
• Modifying class rights requires adherence to procedures specified in company articles and relevant company law, usually involving the approval of the affected class.
• General shareholder rights, such as attending meetings, do not amount to class rights; only unique advantages or preferences specified in the articles are protected as class rights.
• Class rights must be clearly identified within the articles to be enforceable.

Conclusion

The Court of Appeal in White v Bristol Aeroplane Co clarified that only specific rights attached to particular share classes, and not general shareholder rights, are protected as class rights under company articles; changes to such rights require adherence to defined procedures, ensuring clear protection for both companies and investors.