12.6.4 (Classes of shares)

As mentioned above, a share carries certain rights and is subject to some obligations. A company may issue all shares with same rights and obligations. However, it may issue different types of shares with different rights and liabilities attached to them so as to satisfy the needs of different types of investors. In such a case, the rights attached to the different classes of shares are called class rights. The class rights normally relate to voting, dividends, return of capital or share in the surplus assets of the company (the last two rights being available at the time of winding up) and are invariably set out in the articles of the company. The most common classes of shares are: (1) Preference; (2) Equity or ordinary; and (3) Deferred or Founders'. A public company and a private company which is a subsidiary of a public company may not issue shares other than equity, preference and cumulative convertible preference shares (CCPS).

The companies (Amendment) Act, 2000 has substituted a new section for s. 86. It provides that the share capital of a company limited by shares shall be of two kinds only, namely: (a) equty share capital (i) with voting rights; or (ii) with differential rights as to dividend, voting or otherwise in accordance with such rules and subject to such conditions as may be prescribed; (b) preference share capital.