Flashcards in Class rights Deck (20):
What is the authority which states that a share does not give any ownership over the company?
Macaura v Northern Assurance Co Ltd
How is a share defined in Borland's Trustee v Steel Bros & Co Ltd?
"A share is the interest of a shareholder in the company measured by a sum of money, for the purpose of liability in the first place, and of interest in the second, but also consisting of a serious of mutual covenants entered into by all shareholders inter se in accordance with s33 CA 2006."
How does the Companies Act 2006 describe 'shares'?
It only states that shares are 'personal property, and are not in the nature of real estate' (s541).
What two main types of shares are available?
1. Ordinary shares
2. Preference shares
What kinds of preference shares are there?
Preference shares can come in any form but some common types include redeemable shares, convertible shares, deferred shares (rare), Treasury shares, and employee shares.
What are the features of ordinary shares?
1 vote, right to dividend and capital on winding-up.
What distinguishes preference shares from ordinary shares?
Fixed dividend, non-voting, right to excess profits and cumulative profits.
What are 'class rights'?
Rights attached to a class of share eg preference shares or rights attached to a particular individual (Cumbrian Newspapers Group v Cumberland and Westmoreland Herald Newspaper). Class rights will not include outsider rights (Re Blue Arrow).
If there is no express provision giving rights to a share what is the effect?
The shares will be presumed to be equal (Birch v Cropper).
If a share has a preference in favour of one rights but is silent on another, for example if the share explicitly grants rights to cumulative dividends will it also have the implicit right to surplus profits over ordinary shares?
No, the rights given to a share are deemed to be exhaustive (per Sarjant J in Re National Telephone Co and applied in Will v United Lankat Plantations Co Ltd).
Who must be notified about the rights granted to shares?
Companies House (s555).
How may classes of share be created?
By ordinary resolution.
Where do we find the procedure for varying class rights?
Section 630 CA 2006.
Does diluting the power of shares qualify as a variation?
No, the variation must change the actual right conferred by the share, not change the effect or power of that right (White v Bristol Aeroplane Co Ltd and Greenhalgh v Arderne Cinemas).
Does repurchasing preference shareholders outright qualify as a variation?
Generally no because a cancellation is seen as part of the bargain of purchasing shares (House of Fraser plc v ACGE Investments) but there have been exceptions where promises were made not to repurchase (Re Old Silkstone Collieries Ltd).
How are you directed to vote if you're a member of a class?
In the best interests of your class (British American Nickel v O'Brien).
What are the ways in which a variation can be made?
1. Written approval from 75% in nominal value of the issued shares in that class (s630(4)(a));
2. Special resolution at a class meeting (s630(4)(b));
3. Bespoke method provided in articles (s630(2)(a)).
How may a variation be challenged?
If 15% of the class apply to the court within 21 days of the variation being accepted (s633(2)).
What are the two ways of protecting class rights?
1. Setting a definition for a 'variation' in the articles of term of issue (Re Northern Engineering Industries Plc);
2. Entrenching (s22 CA 2006).