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The re-designation/re-classification of shares

May 2014
How & why re-classify shares?

The process of converting issued shares from one class into another is called re-designation, re-classification or re-naming of shares. Companies may seek to re-classify shares following a sale or re-organisation of their company or simply for administrative, historical or family reasons with shareholders choosing or needing to hold different classes of shares. Companies may also wish to attach different rights to different classes of shares, most particularly in relation to voting, rights to dividends and rights to capital on a winding up.

Share re-classification is governed by the Companies Act 2006 as well as the provisions of a company’s articles of association. It can be a procedurally complicated process to follow as there are several legal and procedural issues to consider particularly in relation to what documents are needed to effect a re-classification, whether the articles of the company will need changing, whether the re-classification will trigger an alteration to the company’s share capital, whether class (shareholder) consent is needed and what public filings need to be made.

With all this in mind, we have created a brand new sub folder of documents including an easy to follow, user friendly guidance note to guide you through the process of re-classifying shares as well as how to alter or vary the rights attaching to the newly re-classified shares. Our brand new package includes:

• guidance notes;
• board minutes;
• shareholder resolutions;
• written class consents;
• revised articles of association; and
• relevant Companies House forms.

We have also updated one of our existing board minutes to include the relevant resolution to effect a re-classification within the body of the minute.

This new sub-folder has been written with company secretaries or company directors in mind as well as other professionals such as accountants advising the boards of SME businesses.

The contents of this Newsletter are for reference purposes only and do not constitute legal advice. Independent legal advice should be sought in relation to any specific legal matter.

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