Q&As

Does a cancellation of preference shares involve a variation of class rights? Is class consent required before preference shares can be cancelled?

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Produced in partnership with Julian Henwood of Gowling WLG
Published on LexisPSL on 03/05/2017

The following Corporate Q&A produced in partnership with Julian Henwood of Gowling WLG provides comprehensive and up to date legal information covering:

  • Does a cancellation of preference shares involve a variation of class rights? Is class consent required before preference shares can be cancelled?

Does a cancellation of preference shares involve a variation of class rights? Is class consent required before preference shares can be cancelled?

This Q&A focuses on class rights attaching to shares, but a company that does not have a share capital may have separate classes of members, with different rights.

A company having a share capital may have separate classes of shares. The rights attaching to a particular class of shares will usually be set out in a company’s articles of association or in a shareholders’ resolution approving the allotment of the shares and there may be further shareholder resolutions amending share rights in accordance with the Companies Act 2006 (CA 2006). Rights attaching to a particular class of shares may also be set out in a shareholders’ agreement.

In determining whether class consent is required before preference shares in the capital of a company can be cancelled, it is necessary to consider the provisions of its articles of association and any other document setting out the rights attaching to shares, as well as CA 2006, s 630.

Class consent will be required before any preferences shares in a company are cancelled if:

  1. the company's articles specifically provide that any proposed cancellation of its preference shares requires the consent of the holders of those shares or that any such cancellation is a deemed variation of the class rights

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