Variation of class rights checklist

From time to time you may need to alter the rights attached to a class of shares. Our checklist helps you make sure you follow the correct procedure.

What is a variation of class rights?

A variation of class rights involves a change in the legal rights attached to a class of shares. Some companies find that the statutory definition of a variation is too narrow, so they specify changes that are deemed to be variations in their articles.

Procedures

The company needs to check the articles to see if they set out a variation procedure. If they do, it must be followed. If not, the statutory procedure outlined in our checklist applies.

Even once the correct variation procedure has been followed, the decision can be challenged if the minority shareholders feel that they have been unfairly prejudiced. It is therefore important that variations of class rights can be justified objectively for sound commercial reasons.

Admin

Certain forms need to be filed at Companies House within one month of the variation, depending on the change(s) made. The forms that record changes to share capital can now be uploaded to the Companies House website, or companies can continue to file them in paper form. See our Companies House Filing summary for a rundown of the filing process.