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Classes of shares and variation of class rights (Variation of class rights…
Classes of shares and variation of class rights
Macura v N. Assurance Co Ltd -
SH do not have a proprietary interest in the property of the company
legal nature of share
SH acquires right in co and not against it(as with debenture holding)
SH has various legal attributes which confer rights that are
proprietory
contractual
a share is an interest measured by a sum of money and made up of various rights contained in the contract
Class rights
shares are of one class if the rights attached to them are in all respects
uniform
presumption rebutted if co issues shares carrying different class rights
share issued with express provisions
Re National Telephone co -
deemed to be exhaustive
examples of class of shares
ordinary shares
equities - default category
holders- distributable profits after payment made of any fixed level to preference shareholders
one vote per share
surplus in solvent winding up - entitled after other SHs have their capital returned
Preference shares
a fixed preferential cumulative dividend paid in any year in which co has distributable profits
participating as to dividend? right to further dividend payment after ordinary SH received a distribution = to their initial fixed rate
entitled to return of capital on winding up in preference to ordinary SHs. (express right of participation :unlock: surplus assets)
cannot vote in GM unless dividends in arrears
Convertable shares
capable of being converted into ordinary shares on
a fixed date
or at option of SHs themselves
subj to certain conditions at option of co
Redeemable shares
s684
which are to be redeemed or liable to be redeemed at the option of the co or the SHs
must be fully paid
terms must provide for payment on redemption
Variation of class rights
s630
lays down procedure
class rights may only be varied
in accordance with relevant provisions in the co's articles or
in absence; holders of 75% in value of the shares of that class consent
in writing :pencil2:
special resolution - passed at separate meeting :silhouettes:
co has protected class rights by making provisions for entrenchment of those rights in its articles
circumvented by changing the class rights under s630 :forbidden:
co's articles may provide for more or less onerous req :recycle:
non class rights can be varied by sp resolution under art21
how parameters of class rights are determined
Cumbrian Newspapers v Cumberland
if articles provide that particular shares carry particular rights not enjoyed by the SH of other shares = rights are attached to class of shares :check:
rights and benefits which although are not attached to shares, are conferred on the beneficiary in his capacity as a member or SH in the co
Bushell v Faith
Art gave D weighed voting rights on a resolution to remove any D from the office
abrogation or abrogation determination
corp conduct which effects substance of SHs class right :check:
have to show that it will result in some substantive right guaranteed by the co's constitution being modified or abrogated altogether
Re Old Silk Collieries
compensation scheme promised for return of capital
unfair variation (promise)
cancellation of class of shares on reduction of capital :no_entry:variation
unless co's constitution states otherwise
conduct which affects existence or enjoyment of those class rights :red_cross:
White v Bristol aeroplane
rights attached to any class of shares may be
affected
modified
varied
dealt with
abrogated
in any manner
with the approval of extraordinary resolution passed at a separate meeting of members of that class
claim; issue of additional (od + pref) shares affected their voting rights
variation :red_cross:
it was effectiveness of exercise of those rights which had been effected. separate meeting :lock:
common law
SH voting must have regard to the interest of the class as a whole
British American Nickel corpn v MJ O'Brian
power must be exercised for the benefit of the of the class as a whole and not merely individual members only
not lawful for majority to support the coercion of a minority by voting in favor of a resolution which expropriated the minority's rights under their notes
Right to object to a variation
s633
holder of no less than 15% of the issued shares of the class have right to apply to court to have the variation cancelled
made within 21 days of the consent given/resolution passed :check:
variation no effect until court :check::forbidden:
unfairly prejudice :forbidden:
not unfair prejudice :check:
decision is final :checkered_flag: