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Clarke & Son Blog​

The Company in which I hold shares has different classes of shares, what are my rights?

The rights of a shareholder depend on the rights attaching to their shares under the company’s articles of association, the Companies Act 2006 and any terms given to that class of shares by the company. In order to give different rights to different groups of shareholders, a company can have different classes of shares. There is no limit on the number of different classes of shares a company can have.  

The main rights which are usually considered when giving share rights are:

General meetings and voting

A shareholder has a statutory right to appoint a proxy to attend in their place and receive notice of and attend a general meeting.

Shareholders will ordinarily have the right to vote at a general meeting as shares usually carry one vote per share.  This is not always the case however as companies can issue shares that are non-voting or shares with numerous votes. Some shares may only carry the right to vote in particular circumstances.

Share of the company’s profits

Distribution of a company’s profits are paid by means of a dividend to its shareholders.  A dividend may be paid only if the company has profits. 

It is a decision of the board of directors whether to pay a dividend or not. In the absence of any provision in relation to payment of dividends, dividends must be paid in proportion to the shares held by each shareholder. 

It is becoming increasingly common for a company to have different classes of shares and for its articles of association to provide that the directors be able to vary the dividends allocated to each class.

Final distribution on winding up

If the company is wound up and all creditors have been paid, the remaining assets are available for distribution among the shareholders. This distribution is usually made in proportion to the number of shares held by a shareholder.  A company can however give different share classes different rights in relation to a distribution. 

Other rights of shareholders

Shareholders also have rights to receive certain documents form the company.  The main documents of interest to a shareholder will be the company’s annual report and accounts. Each shareholder has the right to receive these when they are issued generally and upon request.

Shareholders’ rights can also include special rights, including:

  • Rights relating to the appointment of directors.
  • A right to be consulted or informed before the company takes a particular action.
  • Weighted voting rights.

The rights of shareholders can be limited, modified or waived. However, shareholders cannot be financially liable for more than the amount unpaid on their shares.

To conclude, it would be advised that you review the company’s articles of association to fully understand your rights as a shareholder.

If you would like to speak to one of our team, please get in touch with the Corporate Commercial department on 01256 320555.

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