Voting rights of non-voting shares (preference shares)

Company Law

Under the Companies Act 2016, β€œpreference share” means a share by whatever name called, π’˜π’‰π’Šπ’„π’‰ 𝒅𝒐𝒆𝒔 𝒏𝒐𝒕 π’†π’π’•π’Šπ’•π’π’† 𝒕𝒉𝒆 𝒉𝒐𝒍𝒅𝒆𝒓 𝒕𝒐 𝒕𝒉𝒆 π’“π’Šπ’ˆπ’‰π’• 𝒕𝒐 𝒗𝒐𝒕𝒆 𝒐𝒏 𝒂 π’“π’†π’”π’π’π’–π’•π’Šπ’π’ or to any right to participate beyond a specified amount in any distribution whether by way of dividend, or on redemption, in a winding up, or otherwise.

Section 90(4) of the Companies Act 2016 provides that the constitution of a company must set out the rights of preference shareholders with respect to repayment of capital, participation in surplus assets and profits, cumulative or non-cumulative dividends, π’—π’π’•π’Šπ’π’ˆ and priority of payment of capital and dividend in relation to other shares or other classes of preference shares.

Notwithstanding the definition of β€œpreference share”, preference shareholders may have limited voting rights.

The Companies Commission of Malaysia has clarified in its FAQ that preference shares may carry certain voting rights which must be specified in the constitution of the company. 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 subsection 90(4) of the Companies Act 2016. The Companies Act 2016 has generally retained the policy on the rights to vote for preference shareholders from the Companies Act 1965 (Repealed).

Preference shareholders may have the following voting rights if the rights are stated in the constitution of a company:

β€’ when preferential dividend was in arrears and unpaid

β€’ on resolution which varies the rights attached to preference shares

β€’ on resolution for winding up of the company.

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This post was first posted on Linkedin on 4 August 2022.

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