Quick Reads: Class Consent

In his new “Quick Reads” series, Corporate Legal Director Philip Miles will provide an “at a glance” view of some of the most pressing issues in Corporate Law. His first topic is Class Consent.

If your company has different classes of shares (e.g. A shares, B shares, preference shares etc) then you will need to consider class consent when seeking to change share rights.

The basic position is that class consent is required from at least 75% of the shareholders of that class to which the change relates. This is in addition to the special resolution (75% of all shareholders) to change the Articles of Association to reflect such class right change. These are two distinct approvals, both of which need to be obtained.

In the main, share rights are those rights relating to voting, dividend and capital on a winding up. However, as with most things in law, the answer isn’t always straight forward.

Without proper consideration and following the correct procedure, an amend could be void.

That is the basic position, however, and as often is the case there are ways to amend the standard approach and reflect how you want your company to be governed. A well drafted set of Articles of Association could deal with the above along with setting the framework for many other issues we see affecting companies, for example: share transfers (what transfers are permitted and what happens on the death of shareholder), employee shares (obtaining shares back from employees and/or directors when they leave the company, especially on bad terms and what value is paid) and drag rights (ensuring compliance from all shareholders to sell their shares in the event of a proposed sale).

If you need advice around the procedure to correctly change share rights or are interested in knowing more about ensuring your Articles of Association are fit for purpose and work for your company, please contact Philip Miles philipmiles@bexleybeaumont.com  |  07595 912455