Remembering to obtain class consent (that is, a separate consent from a particular class of shareholders) can sometimes be like remembering where you put your keys, what someone’s name is or where you parked the car. So follow the tips in this blog to ensure you never forget to consider whether class consent is needed to make a decision binding on your company.
More than one class of shares?
Firstly, consider whether the company has more than one class of shares. There will be a separate class of shares if the rights attached to it differ from the rights attached to other shares of the company. Remember that a class of shares will not be created by simply giving a different name to a sub-group of shares with the same rights as the other shares. It’s the rights of the shares, not their name, which matters.
Rights attached to shares?
There is no guidance as to what a ‘right attached to a share’ is, but classic examples include voting rights, dividend rights and rights to capital on a winding up. But the concept of rights can sometimes be construed much more widely.
In one case, company A issued ordinary shares to company B. The articles of company A were amended so that company B had a right of pre-emption over unissued shares and the right to appoint a director). The court concluded that these additional rights were ‘rights attached to a class of shares’ even though the rights were given to company B by name rather than to a different named class of shares. The only shares in issue were ordinary shares.
The general rule is that specific rights will be a class right if they attach:
- to one group of shares distinct from another group; or
- b) to a particular shareholder (in their capacity as a shareholder – as was the case with company B above).