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CMA Intermediate · Business Laws and Ethics · Rights of Shareholders

A company has equity shares and two classes of preference shares, A and B. The articles permit variation of class rights. Class A holders vote to vary their rights in a way that also affects Class B holders' rights. Which statement is correct under Section 48?

Consent of three-fourths of the affected Class B holders must also be obtained, along with the Class A approval. The proviso to Section 48(1) applies the same section to the other class, so a simple majority or Tribunal application alone is insufficient.

  1. AOnly Class A approval by the required three-fourths is needed
  2. BConsent of three-fourths of Class B holders must also be obtained, and Section 48 applies to that variationCorrect
  3. CClass B holders may only apply to the Tribunal and need not be asked
  4. DA simple majority of Class B holders is sufficient

Explanation

The proviso to Section 48(1) says that if variation by one class affects the rights of any other class, the consent of three-fourths of such other class shall also be obtained and the section applies to that variation. A simple majority is not enough, and the Tribunal route does not replace the consent.

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