Company law deadline in one day - please help
I went through the s630 OF THE COMPANIES ACT 2006. After conducting research, I am not able to get a proper view as to whether the clause below constitutes class rights.
"A resolution by the board of directors of the company for the purposes of the acquisition of any business exceeding £ 40,000 will only be valid if agreed to by any shareholder holding more than 20% of the issued share capital of the company"
I read the cases of Cumbrian newspapers and Bushell v Faith, and from these cases, it seems like the clause is a class right. But, I have not been able to say for sure.
Whats your view on it?
"A resolution by the board of directors of the company for the purposes of the acquisition of any business exceeding £ 40,000 will only be valid if agreed to by any shareholder holding more than 20% of the issued share capital of the company"
I read the cases of Cumbrian newspapers and Bushell v Faith, and from these cases, it seems like the clause is a class right. But, I have not been able to say for sure.
Whats your view on it?
In Cumbrian Newspapers I think that rights were given by the articles of association to the plaintiff company by name, and Scott J held that they were class rights for that reason, and that is distinguishable from your clause.
I don't necessarily see how Bushell v Faith helps here but I haven't thought about it a great deal.
In any event, don't make the mistake of thinking that you need to reach an absolutely definite conclusion one way or the other. If there are arguments to be made on both sides, then make them and explain how the issue would be resolved on either view. You can (and should) still state which result you think is more likely and the reasons for that.
I don't necessarily see how Bushell v Faith helps here but I haven't thought about it a great deal.
In any event, don't make the mistake of thinking that you need to reach an absolutely definite conclusion one way or the other. If there are arguments to be made on both sides, then make them and explain how the issue would be resolved on either view. You can (and should) still state which result you think is more likely and the reasons for that.
No, I don't personally think so. There is a distinction between:
(i) A right given to the holder of more than x% of the issued shares, (where (as it happens) there is currently only one such rightsholder, X, but that could change); and
(ii) A right given to X provided that he holds more than x% of the issued shares (where there can only ever be at most one such rightsholder).
The second case is Cumbrian Newspapers, the first is yours, and I think they are different in a meaningful way.
(i) A right given to the holder of more than x% of the issued shares, (where (as it happens) there is currently only one such rightsholder, X, but that could change); and
(ii) A right given to X provided that he holds more than x% of the issued shares (where there can only ever be at most one such rightsholder).
The second case is Cumbrian Newspapers, the first is yours, and I think they are different in a meaningful way.
Having now arrived home and read my previous post again, I don't think I worded it very well. I don't think that it matters in (ii) that there can only ever be one such rightsholder. I think the result in Cumbrian Newspapers would have been the same if it said "Such of X and Y and Z as shall presently hold more than 10% of the issued shares shall have {whatever} rights". Perhaps all that really matters is that the potential rightsholders are named specifically.
And having now read Cumbrian Newspapers properly, it's much more debatable than I thought. In talking about Bushell v Faith, he says "The article created, in effect, two classes of shareholders - namely, shareholders who were for the time being directors, on the one hand, and shareholders who were not for the time being directors, on the other hand". So you could argue that your right creates, in effect, two classes of shareholders - namely shareholders who for the time being held at least than 25% of the issued shares, on the one hand, and shareholders who for the time being held less than 25% of the shares".
And having now read Cumbrian Newspapers properly, it's much more debatable than I thought. In talking about Bushell v Faith, he says "The article created, in effect, two classes of shareholders - namely, shareholders who were for the time being directors, on the one hand, and shareholders who were not for the time being directors, on the other hand". So you could argue that your right creates, in effect, two classes of shareholders - namely shareholders who for the time being held at least than 25% of the issued shares, on the one hand, and shareholders who for the time being held less than 25% of the shares".
(edited 6 years ago)
Makes sense, arguing that the current clause is a class right, as there are two classes as you suggested. Again, since it is debatable, it would be up to the courts to make a deliberation. If yes, then the procedure is specified in s.630.
However, I also put forward that, in the current scenario, rights here is only attached to holders of a certain quantity of shares, not a certain class of shares. Therefore, the clause does not have special protection under s.630.
However, I also put forward that, in the current scenario, rights here is only attached to holders of a certain quantity of shares, not a certain class of shares. Therefore, the clause does not have special protection under s.630.
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