Preference shares defined as non-voting

Under the Companies Act 2016 (“CA 2016”),

1. a preference share is a share by whatever name called, which does not entitle the holder the right to vote on a resolution 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;[1] and
2. a share, other than preference share, confers on the holder the right to vote on any resolution of the company.[2]

Limited voting rights of preference shares

Under section 148(2) of the repealed Companies Act 1965, preference shareholders may vote: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states that the CA 2016 has generally retained the policy on the rights to vote for preference shareholders from the repealed Companies Act 1965.

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 with respect to repayment of capital, participation in surplus assets and profits, cumulative or non-cumulative dividends, voting and priority of payment of capital and dividend in relation to other shares or other classes of preference shares.

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it appears that a company may issue preference shares with limited voting rights as set out in section 148(2) of the repealed Companies Act 1965 provided that this is permitted by its constitution and the constitution set out such voting rights.

Can preference shares carry wider voting rights if parties agree as such?

Based on the definition of preference shares and s 71(1) of the CA 2016 (see above), it appears that preference shares may not carry voting rights wider than the limited voting rights set out under section 148(2) of the repealed Companies Act 1965 even if the relevant parties agree to the wider voting rights.

The information in this article is intended only to provide general information and does not constitute any legal opinion or professional advice.

[1] Section 2(1), CA 2016

[2] Section 71(1), CA 2016