There were 4,500 shares of preferred stock and 3,000 shares of common stock of a par value of $100 each. That meant that the preferred shareholders had $450,000 and the common stockholders had $300,000 in the company. The provision was that whenever dividends on the preferred stock were in arrears for a period of one year the preferred shareholders obtained a vote in the company.
Yes. In the last year apparently the common shareholders who had the management of the company saw that they were not going to be able to pay dividends on. the prefered stock and they then passed a by-law changing their 3,000 shares of common stock of a par value of $100 each into 15.000 shares of no par value. When the preferred shareholders stepped in and expected to take over the management of the company they found that they had only 4,500 votes as against 15,000.
But that is exactly what this clause is intended to preclude and prevent. We are saying by statute enacted by this parliament that that thing cannot be done except with the consent of two-thirds majority of the holders of the 4,500 preference shares.
The way this clause stands now, the only shares dealt with were the common shares. The preferred shareholders' dividends were not in arrears at the time this was done, so they had no say, their shares were not dealt with in any way, but they were most seriously affected.
Would it not meet the hon. gentleman's difficulty if both terms were used, "dealt with, or affected"? In one case you are dealing with shares actually changed, and the other shares would be affected. "Dealt with or prejudicially affected."
I am in the hands of the committee, but I do not agree with the hon. member for York-Sunbury (Mr. Hanson) in his construction. Although the common shareholders may have had their votes increased I do not yet see how that prejudices the rights of the preferred shareholders who had not the right to vote. Under the by-law they were given the right to vote in certain contingencies, but those contingencies had not arisen. I may be very stupid about it but I do not see how those preferred shareholders were affected, prejudicially or otherwise.
I think the hon. member for Swift Current (Mr. Both-well) made his point very plain. Three thou-, sand common shares, par value $100, were by virtue of a by-law passed in the ordinary way changed into 15,000 shares each having a vote. They multiplied the voting power of the common shareholders by five. I think it was a pretty sharp device to keep control of the company and prevent it falling into the hands of the preferred shareholders, so depriving the preferred shareholders of the rights contemplated when the fully paid preferred shares were set up and sold to the public.
I am not going to discuss the thing at length, but if the preferred shareholders took their stock on the clear understanding that they had no vote, I fail to see how, it matters to them, not having a vote, whether there were 15,000 votes in the common shareholders or 3,000. But I am willing to accept any suggestion in order to make progress.
is to subsection 2, in the third line, which is the 39th line of the page. I accept the suggestion of the hon. member for Shelburne-Yarmouth (Mr. Ralston) that we strike out the words "dealt with" and in lieu thereof insert the word " affected."