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Facts:The claimant and the defendant were both publishers of
newspapers. They negotiated a transaction whereby D would
acquire one of C’s papers and C would acquire 10 per cent of D’s
share capital. D issued the 10 per cent share holding and as part of
the agreement under which the shares were issued amended its
articles to give C certain rights including preemption rights over
other ordinary shares. The purpose of such rights was to enable C
as a shareholder to prevent a takeover. Subsequently, a few years
later D called a meeting to pass a special resolution to cancel the
articles which gave special rights to C. C sought a declaration that
the rights were class rights which could not be cancelled without his
consent.
Held: The declaration was granted. The special rights granted were rights
which could not be varied or cancelled without C’s consent.Sir, here how C can challenge the variation as C did not have 15% of the shares issued. He only have 10%. And as we know to challenge variation of class rights the shareholder must have at least 15% of shares?
But therein lies the problem with minority share-holdings
Fortunately, the Government in its wisdom (were that wisdom with us in this limbo period of in / out stay / leave Europe chaos) foresaw the possibility of this type of situation arising
There are three possible explanations to this problem:
1 It is possible, though not specifically mentioned in this case that you have quoted, that the articles also stated that where the rights of an individual shareholder are to be amended, that could only happen if that individual shareholder were present at the meeting. Thus, if this had been the case, C could have prevented the alteration by staying away from the meeting
2 Under what used to be Section 208 of the Companies Act 1948 (and I don’t know the current section number under this latest Companies Act) where an individual can show that the acts of the majority are unfairly prejudicial to the interests of the minority, that individual can approach the Court and ask that the prejudicial conduct of the majority be set aside (the expression ‘unfairly prejudicial’ replaced the earlier wording ‘harmful or oppressive’)
3 I believe that I’m correct in saying that, although ‘15% of the shares issued’ is frequently quoted as the benchmark, the law also provides the same rights to the holders of shares conferring 15% of the voting power and, crucially in this case, 15% by number of the shareholders. In the case of D and C, C clearly represents 50% by number of the shareholders
OK?
NB – you were fortunate that I saw this post! If you wish to guarantee an answer to your questions, you should in future post on the Ask ACCA Tutor forum – I monitor that forum every day
*I believe that I’m correct in saying that, although ‘15% of the shares issued’ is frequently quoted as the benchmark, the law also provides the same rights to the holders of shares conferring 15% of the voting power and, crucially in this case, 15% by number of the shareholders. In the case of D and C, C clearly represents 50% by number of the shareholders?*
but sir how it is possible that C have 50% shareholding because majority(75%) shareholders pass the resolution and cancels the class right
sir can you please elebrate this point?I didn’t say “but sir how it is possible that C have 50% shareholding because majority(75%) shareholders pass the resolution and cancels the class right”
I said “and, crucially in this case, 15% by number of the shareholders. In the case of D and C, C clearly represents 50% by number of the shareholders”
There are 2 shareholders, D and C
So in terms of numbers, D represents 50% by number of shareholders and C represents the other 50%
Better?
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