Share classes and voting rights: how they work

The short answer

A share class is a group of shares that carry the same rights. By default, every share in a company has equal rights. The articles of association can create classes that differ, for example in how many votes a share carries, or whether it votes at all.

At a general meeting with several classes, you count votes as the articles assign them, not shares. Some resolutions also need the separate approval of the class whose rights get worse.

In this article, “articles” means the company’s governing document, whatever it is called: articles of association, statutes or bylaws.

What is a share class?

A share class is defined by its rights, not by its name. Under the UK Companies Act, shares are of one class if the rights attached to them are in all respects uniform (Companies Act 2006, s. 629). German law says the same in fewer words: shares with the same rights form one class (AktG § 11).

Equal rights are the starting point in many laws. Classes exist only if the articles create them:

• Denmark. All shares in a capital company have equal rights, but the articles can provide for different classes. If they do, the articles must state the differences attached to each class and the size of each class (selskabsloven § 45).
• Sweden.All shares have equal rights unless the Companies Act’s exceptions apply. The articles may provide that shares of different kinds shall exist or may be issued (aktiebolagslagen 4 kap. 1–2 §§).

Labels such as “A shares” and “B shares” carry no meaning of their own. What each class may do is whatever the articles say.

How can classes differ in voting?

Voting is one of the rights a class can change. The common forms are:

• A different vote value. In Denmark, all shares have a vote, but the articles can make some shares non-voting and give some shares a vote value that differs from the others (selskabsloven § 46, stk. 1).
• No vote. Under German law every share grants a vote, but the Stock Corporation Act allows preference shares to be issued without one (AktG § 12).
• More than one vote.Multiple-vote shares give one class more votes per share than another. Sweden caps a share’s vote at ten times any other share’s (aktiebolagslagen 4 kap. 5 §). Our article on multiple voting rights covers the rest.

A share without a vote does not always lose its seat at the meeting. In Denmark, non-voting shares have a right to attend only if the articles say so (§ 46, stk. 2).

How do you count votes when there are several classes?

Count each holder’s votes from the articles, then add them up per resolution. The number of shares and the number of votes are different figures once classes differ in voting.

The method of voting matters too. In the UK, on a show of hands each member present in person has one vote, whatever they hold. On a poll, a member of a company with a share capital has one vote per share, unless the articles provide otherwise (Companies Act 2006, s. 284).

Before the meeting, record for every holder:

When does a class get its own vote?

When a change makes one class worse off compared with another, many laws require that class’s own approval on top of the general resolution.

• Denmark.Where there are several classes, an amendment to the articles that shifts the legal relationship between them, by changing existing differences or introducing new ones, is valid only if it is approved by holders of at least two thirds of the affected class’s shares taking part in the meeting (selskabsloven § 107, stk. 3).
• Germany.If the relationship between several classes is to change to the disadvantage of one class, the general meeting’s resolution needs the consent of the disadvantaged shareholders, given by a separate resolution (AktG § 179(3)).
• United Kingdom.Class rights can be varied as the articles provide. If the articles say nothing, the class must consent: in writing by holders of at least three quarters in nominal value of the class’s issued shares, or by a special resolution at a separate general meeting of the class (Companies Act 2006, s. 630).

In practice, that means two counts for one item: the general vote, and the class vote. Keep both results in the minutes.

At a glance

Checklist before the meeting

• We know which share classes our articles create, and what each class may do.
• We know the votes per share in each class, and which classes do not vote.
• Our register shows each holder’s shares per class and total votes.
• We know, for each item, whether the vote is by show of hands or by shares.
• We know which items change class rights and need a separate class approval.
• The minutes will record the general result and any class result separately.

Where Assembley fits

Assembley’s Advanced voting add-on adds votes by shares or weights, share classes and multiple voting rights. Your articles decide what each class may do; Assembley counts the votes you configure.

How share classes are set up in Assembley: Understanding Share Classes and Voting Rights, Creating Share Classes and Share Capital vs Voting Rights Explained.