What is the effect of a company's bylaw increasing its capital stock by 2,000 shares?

Saskatchewan, Canada

The following excerpt is from Smith v. Hanson Tire Company Ltd., 1927 CanLII 162 (SK CA):

In Martin v. Gibson (1907) 15 O.L.R. 623, the headnote is in part as follows, which is sufficient to show the nature of the action: The directors of an electric railway company passed a bylaw increasing the capital stock by 2,000 shares, and this was sanctioned by a majority of two-thirds in value of the body of shareholders at a meeting. The first batch of 350 shares the directors ex parte allotted at par to five of themselves, and also allotted the remaining 1,650 to the same five, but after issuing a circular to the body of shareholders, whereby the latter were invited to state whether they desired to increase their holdings, and wherein it was set forth that such shares might be allotted as seemed to the directors desirable and necessary. * * By the company’s Act of incorporation, 56 Vict. ch. 95, secs. 13 and 46 (O.), the capital stock could be increased, and certain traffic and other arrangements with other companies could be permitted, only upon approval by two-thirds in value of the shareholders. The directors did not wish or intend to allot the new stock among the shareholders pro rata, but so to deal with the last 1,650 shares as to appropriate for themselves enough shares to give them more than a two-thirds majority in value of shareholders.

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