Question

Question 2: a) Explain what is meant by “shares” and “classes of shares”. Use examples to support your answer.

b) A company has 80% ordinary shareholder and 20% preference shareholders. The company would like to change the amount of dividend received for the preference shareholders. How can the rights of the preference shareholders be changed? As part of your answer, explain the voting procedure for the given situation.

PLEASE DO NOT COPY AND PASTE.

Answer 1

Meaning of shares: Shares are units of ownership interest in a company or financial asset that provide an equal distribution in any profits, if any are declared, in the form of dividends. The two main types of shares are common shares and preferred shares. Generally shares represent all kind or class of shares.

Classes of shares: A share class are different types of shares in company stock that have different levels of voting rights. For example, a company might create two classes of shares class A share and a class B share, where the class A shares have less rights than class B shareholders. Each classes of shares term & condition may vary as per company & investor opinion.

Part 2)-

If the company wants to change the dividend payable to preferance shareholders or rights of the preferance shareholders can only be made after obtaining the approval of preferance shareholders. Since the existing rights are agreed by company as well as preferance shareholders, hence if company wants to changes any right it need to obtain permission of preferance shareholders.

Generally preferance shareholders are not entilited to vote on any matter in the general meeting, except matters relating to them. Since if company wants to change the rights of preferance shareholders, the company conduct general meeting & obtain consent from the preferance shareholders, based on the type of the resolution voting requirement percent will change.