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CMA Intermediate · Business Laws and Ethics · Rights of Shareholders

The share capital of Kaveri Foods Ltd is divided into equity and preference classes. Its articles contain a provision for variation of class rights. The company wishes to vary the rights of its preference shares. Which of the following satisfies the requirement of Section 48(1)?

Variation needs written consent of holders of not less than three-fourths of the issued shares of that class, or a special resolution passed at a separate meeting of that class holders. Section 48(1) does not accept half consent, an ordinary resolution, or mere Registrar approval.

  1. AConsent in writing of holders of at least one-half of the issued preference shares
  2. BOrdinary resolution of all members in a general meeting
  3. CConsent in writing of holders of not less than three-fourths of the issued preference shares, or a special resolution at a separate meeting of that classCorrect
  4. DApproval of the Registrar of Companies alone

Explanation

Section 48(1) allows variation, where the articles provide for it, with written consent of holders of not less than three-fourths of the issued shares of that class or by a special resolution passed at a separate meeting of that class. A simple majority or an ordinary resolution is insufficient.

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