Law of Business Organisation: Shareholders' Rights and Preference Shares

LAW OF BUSINESS
ORGANISATION
Name of Student
Name of University
Author Note

Share-
• property of the shareholders in
the company
• consists of rights that the
shareholders are entitled to
• mentioned in the company’s
articles of association and the
memorandum of association
• Issued for confining corporate
control, raising capital and
minimising tax(Austin and Ramsay
2015).
Bank of NSW v Commonwealth [1948] HCA 7
Preference share-
• shares by which the shareholders
are entitled to fixed
dividends(Hannigan, 2018)
• prioritized over the dividends
payable over the dividends of
ordinary shares
Section 254A
Preference shares are only issued by a company if a few
matters have been set out either by way of the constitution
of the company or has been approved by way of the
company’s special resolution

section 246B (2) of the Corporations Act
2001-
• variation or cancellation of the class rights of the shareholders of a
corporation would be done by way of a special resolution if there is no
procedure set out by the constitution of the corporation
• There has been no mention XYZ Ltd’s constitution to be setting out
the procedures for the variation of the class rights of the shareholders
• Therefore the variation of the class rights of the shareholders would
be done by passing a special resolution
Section 246C (2) Corporations Act
2001-
• if only in some of the shares the class rights of the
shareholders are seen as varied then all other existing
shares of that class of the corporation would be varied
• The issue of 2000 preference shares are seen as
cumulative therefore the issue of new preference
shares would not be amounting to class right variation
for the previous shares.

Section 1.5.9 of part 1.5-
• the dividends are payments which are paid by the
company to the shareholders
• the preference shareholders are only entitled to the
5% dividend
Section 254T-
• These dividends can only be paid
if the assets are exceeding the
liabilities and the payment of
such dividend is fair to the
shareholders as a whole