Re Duncan Gilmour & Co (1952) 2 All ER 871
In this case there were three classes of stockholders concerned, the first preference, the second preference and the ordinary.
Clause 5 of the Company Memorandum provided: The capital of the company is £125,000 divided into seven thousand five hundred preference shares and five thousand ordinary shares of £IO each. The holders of the said preference shares shall be entitled to a fixed cumulative preferential dividend at the rate of £6 per centum per annum on the amount for the time being paid up thereon, and to a preferential right in the distribution of the assets of the company in the event of a winding-up or otherwise. The company also takes power to increase its capital and to issue the whole or any of the shares in such increased capital, as ordinary preference or deferred shares, or with such other rights privileges or conditions attached thereto as the special resolution authorising the increase of capital may determine, subject toany special or fixed rights attaching to any of the existing shares issued prior to increase of capital.
Both classes of shares were subsequently converted into stock. The articles of association and in particular article 160 were relied on by counsel for the preference stockholders as enlarging their rights beyond those given to them by the memorandum.
Held: "These passages show the limited area in which it is proper to refer to the articles of association, and in my judgment, it emerges from these passages that the first thing I have to do is to endeavour to construe clause 5 of the memorandum standing alone and to say whether on that construction there is any material matter as to which as regards the rights of the preference shareholders that clause is silent."
That, he said, would be sufficient to deal with the first preference stock but in case he should be wrong in that conclusion he would refer to article 160 assuming for the purpose that he was entitled to do so. In his opinion that article was designed as an administrative provision and did not purport to alter or vary the rights of the holders of preference shares.
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