In
viewtopic.php?p=124785#p124785johnhemming wrote:There is an important issue, however, in that the shares are described as irredeemable. I accept that there is a definition of "redeemable shares". I accept also the historic practice of the UK House of Lords Judicial Committee in accepting that a return of capital is not inherently outwith the contract created by the shares. However, "irredeemable" means to me that they cannot do this (without the permission of the class). They can obviously buy shares in the market and offer to buy by tender. If they went bust then that is life and the preference share contract comes to the fore.
John, I'm sure I don't need to spell out the logic why, but if you interpret the law as you have above, specifically the section in bold, the inevitable conclusion is that
any company and all companies whose shareholders choose to issue preference shares will lose its right and that of the ordinary shareholders to return any capital at all without the agreement of the preference shareholders (with a 75% majority). Let me rephrase that: a 25% minority of preference shareholders, no matter how small the class would have a blocking veto on any capital reduction whatsoever (or voluntary winding up for that matter).
That absolutely cannot be the intention of company law.
As the law is written,
if the preference shares are non-equity (and I have stressed this over and over) then the rights of the holders in a capital reduction are known
a priori and the courts have always ruled that a capital reduction does not affect their enjoyment of their rights because capital reduction was always part of the bargain. In the case of
equity preference shares (or indeed if some relevant right has been added after their issue affording them a share of profits for example) then courts have ruled that there
does have to be a class vote.
Note that the law
does not forbid the shareholders from
binding themselves in the way you suggest above by writing additional restrictions (over and above those in the CA2006) into the Articles. It just not impose this restriction on all companies automatically. I have stressed this multiple times.
However, such restrictions were not introduced in the specific case of Aviva for at least some of their subsidiary prefs.
Please carefully study the above distinction between equity and non-equity shares. They are defined in CA2006. This is all explained very clearly in the web page you linked to earlier, with numerous case examples.
GS