Participation in surplus assets: preference shareholders share rateably with ordinary shareholders where articles are silent on disposition.

Whether preference shareholders are excluded from surplus assets turns on contractual construction of the memorandum and articles: surplus assets form part of the joint fund remaining after liabilities are paid and capital returned, and absent an express contrary provision in the constitutional documents preference rights limited to dividends or priority capital repayment do not, prima facie, exclude participation in surplus. The court applied the partnership-like contractual view of membership, held that silence in the articles preserves parity of contributory rights, and concluded surplus is distributable rateably between preference and ordinary shareholders.

---

---

Issues: Whether, on the true construction of the memorandum and articles of association, preference shareholders are excluded from participation in surplus assets after payment of liabilities and return of paid-up capital, or whether surplus assets are distributable rateably between preference and ordinary shareholders.

Analysis: The Court examined the nature of surplus assets as part of the joint stock or common fund remaining after liabilities are discharged and capital repaid, and treated the question as one of contractual construction of the memorandum and articles. Authorities establish that shareholders enter into a partnership-like contract and that, absent express provision to the contrary, members are entitled to equal treatment in respect of assets remaining on winding up. Attachment of preferential rights to dividend or priority repayment of capital does not, prima facie, exclude participation in surplus assets. Each case depends on the specific terms of the company's constitutional documents; where those documents are silent as to the disposition of surplus after repayment of capital, parity between shareholders should not be displaced by implication. Applying these principles to the memorandum and articles in this case, the Court found no express or implied provision displacing the parity of contributory rights in respect of surplus assets.

Conclusion: The surplus assets remaining after payment of liabilities and repayment of paid-up capital are distributable rateably between preference and ordinary shareholders; the appeal is dismissed and the preference shareholders are entitled to share in the surplus.

---