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In this edition of ‘It depends’, senior associate
Keeghan Silcock talks about what your share class rights are in a
Hi and welcome to another edition of It Depends.
Today I’ll be talking about what are your share class rights
in a private company.
What are my share class rights in a private company?
It depends. The share class rights in each private company are
not uniform. That is not all ordinary shares will have the same
rights in each different private company. The way that your rights
as a shareholder in a company are determined is based on an
agreement between the company and the shareholder. It is quite
common to see that the share class rights are documented in the
constitution of the private company. Or you may see that these are
agreed between the shareholder and the company in a separate terms
of issue sheet.
What happens if there is no written record of share class
So, what happens if there is no written record of the rights
attaching to a particular class of shares? For example, you might
not have a constitution for a company or the constitution might be
silent as to the rights that attach to a particular share class. In
this case, there are some replaceable rules in the Corporations
Act, which could give some clarity around the rights that attach to
that class of shares, for example, there is a replaceable rule
which says that in the absence of any evidence to the contrary,
each shareholder in a company will have one vote on a show of hands
or otherwise have one vote per each share held if a poll is
demanded. There is also a presumption at common law that all of the
classes of shares will carry the same rights and liabilities unless
there is evidence to the contrary. So, if you have some rights that
are written down for a particular class of shares but not others,
then you might find that there is a presumption that both of those
classes of shares carry the same rights and liabilities.
How can share class rights be varied?
If you want to vary the rights that attach to a particular class
of shares then you could do this following the provisions in the
company’s constitution. However, there may be constitutions
which don’t set out the way that the share class rights can be
varied. Or again, you might not have a constitution for a company,
in which case you would need to follow the procedure set out in the
Corporations Act. That procedure involves special resolution by all
of the shareholders of the company, as well as approval by the
persons holding at least 75% of the class of shares, the rights of
which you’re looking to vary. It’s important that you seek
tax advice before varying the rights that attach to a class of
shares because there can be tax consequences of doing that. For
example, value shifting issues.
Cooper Grace Ward is a leading Australian law firm based in
This publication is for information only and is not legal
advice. You should obtain advice that is specific to your
circumstances and not rely on this publication as legal advice. If
there are any issues you would like us to advise you on arising
from this publication, please contact Cooper Grace Ward
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