Shareholders' Letter Approving Variation of Class Rights

Use this Shareholders’ Letter Approving Variation of Class Rights where the holders of a class of shares are giving written consent to a variation of the rights attached to that class of shares.

Share classes and the rights attached to them

A company’s share capital may comprise different classes of shares (for example, ordinary, A and B, and preference shares), each carrying different rights.

Rights and privileges are set out in the company’s articles of association and often include:

• voting rights (control through voting at meetings);
• rights to participate in distributions of profits; and
• rights to participate in surplus assets on a winding up.

Giving written consent to a variation of class rights

If rights attached to a class of shares are varied, the Companies Act 2006 rules on variation of class rights must be followed. Rights attached to a class of shares may only be varied in accordance with a provision in the company’s articles for varying those rights.

If the articles do not contain such a provision, the class rights may be varied if the holders of shares of that class consent to the variation (unless the articles restrict variation of class rights).

The consent required is either:

• written consent from the holders of at least three-quarters in nominal value of the issued shares of the class to be varied (excluding any treasury shares); or
• a special resolution (75% majority) consenting to the variation passed at a separate general meeting of the holders of the class to be varied.

This letter is designed for the written consent route described above.

Changes to the variation provisions in the articles

Any amendment to a provision in the articles that relates to variation of the rights attached to a class of shares (or the insertion of such a provision) will be treated as a variation of those rights and the same rules must be followed.

It may be advisable to seek legal advice regarding the variation of class rights.

Shareholders' Letter Approving Variation of Class Rights is part of Corporate. Just £38.50 + VAT provides unlimited downloads from Corporate for 1 year.