Variation of Shareholders' Rights — Section 48

# Variation of Shareholders' Rights — Section 48

## Concept

'Variation of class rights' means a change in the rights attached to a particular class of shares (e.g. dividend rate, voting power, redemption terms). Section 48 prescribes a strict procedure to safeguard the affected class.

## Steps for valid variation

### Step 1 — Authorising provision must exist

The memorandum or articles must contain a provision entitling the company to vary class rights. If absent, the terms of issue of that class must not prohibit such a variation.

### Step 2 — Consent of the affected class

Obtain either:

• Consent in writing from holders of at least 75% of the issued shares of that class; OR
• A special resolution sanctioning the variation at a separate class meeting.

### Step 3 — Impact on another class

Proviso to Section 48(1): If the variation by one class affects the rights of any other class, 3/4ths of such other class must also consent. Section 48 procedure applies to that consent as well.

### Step 4 — Tribunal route for dissenters

Dissenting shareholders may approach the Tribunal:

• Who can apply? Holders of at least 10% of the shares of that class who did not consent or did not vote in favour.
• Time limit: Within 21 days from the date of consent/resolution.
• Made by: One or more shareholders appointed in writing on behalf of those entitled.
• Effect: Variation does NOT take effect unless and until confirmed by the Tribunal.

### Step 5 — Filing with Registrar

Under Section 48(4), the company must file a copy of the Tribunal's order with the Registrar within 30 days of the date of the order.

### Step 6 — Binding effect

The Tribunal's decision is binding on all shareholders of that class.

## Procedural flowchart

```

Is variation authorised by MOA/AOA or not prohibited by terms of issue?

|

v

YES

|

v

Obtain 75% consent in writing OR pass special resolution at class meeting

|

v

Does variation affect any other class?

| |

YES NO

| |

v v

Obtain 3/4 consent Proceed

of affected class

|

v

10% dissenters apply to Tribunal within 21 days?

| |

YES NO

| |

v v

Variation suspended; Variation effective

Tribunal confirms

|

v

File order with ROC within 30 days

```

## Key thresholds in summary