Shareholders' Letter Approving Variation of Class Rights

Shareholders' Letter Approving Variation of Class Rights

CO.CA.ML.07
This Shareholders’ Letter Approving Variation of Class Rights can be used by the holders of a class of shares to consent to a variation of the rights attached that class of shares.

The capital of a company may comprise a number of different classes of shares - ordinary, A and B, and preference, for instance. Each will have different rights.

Members’ rights and privileges are detailed in the Articles, but the following are typical:
- right to control company through voting at meetings
- right to participate in distribution of profits
- right to participate in surplus assets in a winding up.

If the rights attached to a class of shares are varied, then the rules in the Companies Act 2006 on the variation of class rights must be followed. Rights attached to a class of a company’s shares may only be varied in accordance with a provision in the company’s articles for the variation of those rights. If the company’s 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 there is a restriction on the variation of class rights in the articles of association). The consent required for the variation is either (a) consent in writing from the holders of at least three-quarters in nominal value of the issued shares of the class to be varied (excluding any shares held as treasury shares), or (b) 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 Shareholders’ Letter Approving Variation of Class Rights can be used to give consent under point (a).

Any amendment of a provision contained in a company’s articles for the variation of the rights attached to a class of shares (or the insertion of any such provision into the articles) will be treated as a variation of those rights and the same rules must be followed. It would be advisable to seek legal advice regarding variation of class rights.

Optional phrases / clauses are enclosed in square brackets. These should be read carefully and selected so as to be compatible with one another. Unused options should be removed from the document.

This letter is in open format. Either enter the requisite details in the highlighted fields or adjust the wording to suit your purposes.

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