Limited voting rights of preference shares

Company Law

Preference share, by definition under the Companies Act 2016 (“๐‚๐€ ๐Ÿ๐ŸŽ๐Ÿ๐Ÿ””) of Malaysia, does not entitle the holder to the right to vote on a resolution. See sections 2(1) and 71(1) of the CA 2016 .

Under section 148(2) of the repealed Companies Act 1965, preference shareholders may vote:

*when preferential dividend was in arrears and unpaid;
*on resolution which varied the rights attached to preference shares; and
*on resolution for winding up of the company.

There is no equivalent provision under the CA 2016.

However, the FAQ on the website of the Companies Commission of Malaysia states that preference shareholders may be able to vote on matters relating to their respective class of shares provided that such rights are stated in the constitution as required under section 90(4) of the CA and that the CA 2016 has generally retained the policy on the rights to vote for preference shareholders from the repealed Companies Act 1965.

It should be noted that the FAQ issued by the Companies Commission of Malaysia is for reference and does not have legal force.

Section 90(4) of the CA 2016 provides that a company must not allot any preference shares or convert any issued shares into preference shares unless provided by the constitution and the constitution shall set out the rights of the shareholders including voting rights.

Reading the FAQ together with section 90(4) of the CA 2016, it appears that a company may issue preference shares with limited voting rights as set out in section 148(2) of the repealed Companies Act 1965 provided that this is permitted by its constitution and the constitution set out such voting rights.

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This post was first posted on Linkedin on 28 May 2022.

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