COMPANY LAW IN GHANA- CORPORATE FINANCE- SHARES ( 3) - Classification of Shares and Their Rights

Classification of Shares and Their Rights Under the Companies Act, 2019 (Act 992)- SECTIONS 49 TO 54 1. Classification of Shares The registered constitution of a company may establish different classes of shares, each with distinct rights or restrictions. These differences may relate to dividends, voting rights, repayment, or other corporate privileges. However, shares can only be considered part of the same class if they rank equally for all purposes. 2. Variation of Class Rights Where a company’s shares are divided into different classes, the rights attached to a class cannot be varied unless explicitly provided for in the company's constitution. If the constitution explicitly prohibits variation of class rights, such rights can only be modified through a court-sanctioned scheme of arrangement under section 239 of the Companies Act, 2019. Unless otherwise restricted by the company’s constitution, a company may alter its constitution to introduce provisions governing class rights variation or modify existing provisions through a special resolution. Such amendments require prior written consent from holders of at least three-fourths of the issued shares of each class or approval through a special resolution of the affected class shareholders. A resolution leading to a reduction in the proportion of voting rights or dividends allocated to a class of shares constitutes a variation of class rights. Consequently, such a resolution requires the same level of consent as other class rights variations. 3. Preference and Equity Shares A preference share is defined as a share that entitles its holder to a fixed monetary distribution without participation beyond that specified amount. Conversely, any share that does not fall under this category is classified as an equity share. The definition of preference shares applies regardless of the nomenclature used by the company in its constitution. 4. Suspension of Voting Rights of Preference Shares Holders of preference shares generally do not possess voting rights unless certain conditions are met. Despite this, preference shareholders have the right to vote under specific circumstances, including: When a preferential dividend remains unpaid for a period exceeding 12 months or another period specified in the company's constitution; When a resolution seeks to alter class rights; When voting on the removal or appointment of an auditor; or During a resolution for the winding up of the company. Except for these circumstances, preference shares carry one vote per share only when voting on a poll at a general meeting. If a company increases the number of shares within a particular class, it may resolve that existing preference shares maintain voting ratios in alignment with their original voting influence at general meetings. A dividend is considered due: The day after the expiration of the period for which the dividend was declared; or On the date designated in the company's constitution for dividend payment. 5. Voting Rights of Equity Shares Unless otherwise stated in the company’s constitution, equity shares confer one vote per share at general meetings. Furthermore, any alteration converting preference shares into equity shares constitutes the issuance of equity shares. 6. Canons of Construction of Class Rights When interpreting a company’s constitution regarding share rights, the following principles apply: Dividends: A dividend is payable only if the company formally declares it. Cumulative Preference Dividends: If a preference dividend is fixed, it is presumed cumulative, meaning arrears must be paid before dividends on other share classes. Preferential Dividends in Winding Up: In a company’s winding-up process, cumulative preference dividend arrears are payable until the actual payment date. Non-Participation in Further Dividends: Preference shares with rights to fixed dividends are presumed not to participate further in additional distributions. Priority in Winding Up: If a class has a preferential right to asset distribution during winding up, it is presumed not to have additional rights beyond that priority. Distinguishing Profit Sources: When distributing assets in winding up, the distinction between accumulated profits and surplus funds is disregarded unless otherwise indicated. Equal Ranking of Shares: All shares rank equally unless a contrary intention is specified in the company’s constitution.