House of Fraser v AGCE Investments Ltd [1987] AC 387 (HL)

• Defendant made a reduction in capital; repaid the non-participating preference shareholders first.

• Was provision in articles for class consent to be required wherever class rights where ‘affected’; moreover Defendant claimed that reduction had caused variation in class rights.

Held

• Is no variation of rights

  • Paying off preference shares entitled to priority on a winding-up is giving effect to rights attached to those shares

  • Moreover by having priority upon a return of capital, non-participating preference shareholders must be taken to have agreed to allow their entitlement to be extinguished first

• Moreover rights attaching to shares were not ‘affected’

  • Words ‘affect’ contemplate that there is some right remaining after transaction in question

  • Whereas here, Claimant’s rights were completely extinguished