PREFERENCE SHARES

Waikato Times, Volume 130, Issue 21737, 25 May 1942, Page 4

PREFERENCE SHARES

CLAIM FOR DIVIDENDS APPEAL UNSUCCESSFUL (By Telegraph.—Press Association) WELLINGTON. Saturday The Court of Appeal, consisting of the Chief Justice. Sir Michael Myers. Mr Justice Blair. Mr Justice Kennedy. Mr Justice Callan and Mr Justice Northcroft. has given judgment in a case involving an appeal from the judgment of Mr Justice Ostler at New Plymouth last October, in which Newton King. Limited, were successful. The applicants were W E. Besl and A. O. Wilkinson, accountants, oj Christchurch.

The question for decision by the Court of Appeal was whether £83.934 accumulated profits was ov'tng by the company to preference shareholders. In effect, the contest was between preference shareholders as a whole and ordinary shareholders with regard to the company’s retention of accumulated profits. By the memorandum of association, preference shares confer on the holders the right to a fixed cumulative preferential dividend of 6 V2 per cent, in priority to ordinary shares. No dividend was paid from 1931 to 1939, inclusive, although the total profits for those years were £117,527. The directors declared no dividends, but, after providing for reserves, carried the profits forward. The appellants claimed that a dividend i was due for the period amounting to I £83.934, and sought distribution of this ! sum among preference shareholders, and also a declaration that future profits should not be set aside for reserves or carried forward until preference shareholders had been paid. The Chief Justice and Mr Justice Blair held that, since the memorandum of association was silent as to whether the directors might appropriate profits to reserves or carry profits forward, the articles must be invoked. On the construction of the memorandum and the articles together, it was held that the company was entitled to create reserves and to carry over profits. that the matter was one of internal administration, and that preference shareholders were, therefore, not entitled to dividends for the years mentioned, since none had been declared. The appeal thus failed completely and costs were allowed ito the respondent. 1 Mr Justice Kennedy. Mr Justice Callan and Mr Justice Northcroft in separate judgments came to the same conclusion.