ACCA Applied Skills · Corporate and Business Law (Global) · Share capital
Zelta Co has ordinary shares and 6% preference shares in issue. Its articles say nothing about how class rights may be varied, and the company is governed by a typical Global-variant company law regime. The directors propose a change that would reduce the preference shareholders' priority on a winding up. Which of the following is the usual starting point for the procedure?
Class rights are varied by following the procedure in the articles, or the statutory default if the articles are silent. This requires the affected class's consent, usually a special majority or written consent. The directors alone cannot vary the rights, and a court is not the first step.
- AThe change must follow the variation procedure in the articles, or if the articles are silent, the statutory default procedure requiring class consentCorrect
- BThe change may be made by a simple majority of the board without involving shareholders
- CThe change can only be made by the court, with no shareholder vote
Explanation
Class rights are normally varied by following the procedure set out in the articles or constitution. Where these are silent, the statutory default requires the consent of the affected class, typically a special majority of that class or its written consent. The board alone cannot alter shareholders' class rights, so option B is wrong.
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