8b Class Rights

Question 1

What are class rights?

Answer 1

• Special rights given to different classes of shares e.g. dividend rights.

Question 2

How would a company change the rights of a class of share?

Answer 2

If the rights are entrenched then set procedure can be followed.
If not a special resolution must be passed (>=75% of members in that class).

Question 3

What minority protection is there for a change in class of share?

Answer 3

If minority is 15%, they can appeal to the courts within 21 days.

Question 4

When would the court over rule the change in rights of a class of shares?

Answer 4

If the change was unfairly prejudicial to the members rights.

Question 5

How would the petitioner prove that the change in rights was unfairly prejudicial?

Answer 5

If the rights themselves have changed e.g. if previous rights were 1 vote per share but changed to 1 vote per 10 shares then this would be considered unfairly prejudicial.

Question 6

When would a variation of rights not be considered unfairly prejudicial?

Answer 6

If their power has changed but their rights have not e.g. shares are transferred to someone else meaning you have less shares but rights of those shares stayed the same so if 1 share was 1 vote, this is still the case but they just have less shares.