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ACCA Applied Skills · Corporate and Business Law (Global) · Company meetings and resolutions

Delta Co has two classes of shares: ordinary shares and 6% preference shares. The directors propose a change to the company's constitution that would reduce the preference shareholders' fixed dividend rights. The change has been approved by the ordinary shareholders in a general meeting. What further meeting is generally needed to vary the preference shareholders' rights?

A separate meeting of the preference shareholders as a class is needed to consent to the variation. Class rights cannot be changed just by the ordinary shareholders or the directors, because the affected class must itself approve under the constitution or applicable law.

  1. AA meeting of the preference shareholders as a class, to consent to the variation under the procedure set out in the constitution or applicable lawCorrect
  2. BA board meeting of the directors, because directors alone can vary class rights
  3. CNo further meeting, because approval by the ordinary shareholders binds all classes of shareholder

Explanation

Rights attached to a class of shares are generally varied only with the consent of that class, normally through a separate class meeting or written consent, in addition to any general meeting approval. Approval by ordinary shareholders alone does not bind the preference class, and the directors cannot override class rights.

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