Variation at the top of the class rights

Despite being a white middle class male, Corporate Blawg tans himself darkly,  accentuates his words to sound terribly posh, and freely admits to like floral designs on upholstery; yet Corporate Blawg considers it would be wrong to try to change his demograph, at least without a 75% conviction that it is the right thing to do.
            Similar considerations affect different classes of shares.  The different "class rights" are, by necessity, rights attached to shares (Re Blue Arrow plc [1987] BCLC 585 at 590). Shares can have a wide range of rights attached to them and may be categorised in different classes, e.g. ordinary shares, "A" ordinary shares, or convertible non-redeemable cumulative nil-paid part-participating preference shares.  Varying these rights does not require plastic surgery or a country mansion, but does effect a change in social standing.
              Section 125 of the Companies Act 1985 sets out the preliminary provisions for varying class rights.  Save as to any express contravention in the Articles of Association, a variation in class rights must be by 75% majority decision of the members in that class.  The Memorandum or, more often, the Articles of Association often contain the detail of the class rights, and this is especially so in relation to shares issued as part of a private funding to a private equity investor. 
              Usually the provisions fo the Articles will prevail over the fall-back option of 75% as provided for in the Companies Act, and may require a lesser majority, such as 50 or 60% depending on what percentage the private equity house has and any other investors the house wishes to "freeze-out".  However, section 125 states that the provisions in the Articles for varying class rights does not apply to:

the giving, variation, revocation or renewal of an authority for allotment under section 80 or with a reduction of the company's share capital under section 135

          Why on the future lunar base would this be?  Note that the exclusion makes reference to section 80 and section 135.  The key to understanding this provision is that these activities requires additional statutory actions to be undertaken, which have a statutory requirement of 75% majority approval to overide them.  The lesson here is that not all exclusions or special provisions in legislation have their own purpose under that section.  Some exclusions will be purely to ensure the statute fits together, sometimes with other statute, without leaving any funky lacuni. The spotter is the express reference to another section.  Anyway, back to class rights...
           If there are any variation of class rights, 15 % of the shareholders of the class in question may petition the court within 21 days of consent of resolution to vary the rights.  The 15% can request the court cancel the variation (under s.127(2)).  There are no specific provision for court sanction where class rights are varied by a company without the consent or resolution of the shareholders.  It is not too great a leap of cognisance to see that the court would have the same powers under s.459-461 on the protection of minorities (and unfair prejudice particularly).
          If the varation of class rights (maybe by some members be treated differently to others) is not covered in the Articles or Memorandum, the company must notify the registrar within one month of such variation, setting out the particulars of the rights (under s.128 and on a Form 128).  Failure to do so will make the company and every officer liable to a fine, and a daily fine for further contravention.
          A key point for directors and advisors is that class rights can be varied simply by preferential treatment of certain shareholders over others.  A director who is a shareholder may have access to greater information than an independent shareholder.  If the director's knowledge drives him to make a decision in relation to his shares that he might not have otherwise have made, that director's shares may be construed as being of a different class.  On further consideration under this scenario, the director would have breached a fiduciary duty and made a private profit... but the point remains if the shareholder was an employee of the company.
         Corporate Blawg has found that there are many dangers with varying class rights, and a strict procedure must be adhered to.  Corporate Blawg therefore will continue to apply his tanning lotion every hour on the hour, will never say "orf" instead of "off" and will buy a Batman comic (signed by Bob Kane) to put on his wall for every floral design that also decorates his flat.

Comments

[Zoey]

This is a great topic, I am thrilled to see more and more peopletaking an interest in our industry. I have been in the indoor tanning business for a little over 5 years, now I am brining it online!! I am in the process of starting up a full scale online tanning store. We'll have everything from major brand lotions to a full line of accessories. I also have a blog that will bring insight to all topics and questions tanning related. Tanning Junkie will be priced 55-75% lower than you are paying in your local salon for tanning lotions and more..... Stay tuned for more.

Zoey
www.TanningJunkie.com

[propecia online]

whatever our interests, our rights are undeniable and must be enforced in any circumstance

[viagra online]

When implementing process or information system changes, slow and steady doesn't necessarily win the race. You have the need for speed.

[Miami Information]

there are many dangers with varying class rights, so they need to be careful

[lasix]

Thank you! I didn't know they picked up on it until I saw your comment.