Shares, Share Capital, Membership and Shareholder Rights
Shares and capital
A share is a chose in action and a bundle of rights (dividend, vote, return of capital). CAMA 2020 abolished authorised share capital; companies now have issued and unissued share capital. Shares may be allotted by directors if authorised by the articles or an ordinary resolution; consideration may be cash or kind, but shares cannot be issued at a discount. Dividends are payable only out of profits, never capital.
Classes and variation
Ordinary shares carry residual rights; preference shares carry a priority dividend, cumulative only if the articles say so, and may be participating. Variation of class rights requires the consent of 75% of that class in writing or a special resolution of the class.
Membership and rights
Members are entered in the register; the certificate is prima facie evidence of title. Shareholders may vote, appoint proxies, demand a poll, receive accounts, petition for winding up, and sue for personal wrongs. A wrong to the company must be pursued through the company or a derivative action.
Worked example
Ada holds 10,000 8% cumulative preference shares. No dividend is declared for two years. In year three the company declares an ordinary dividend. Ada is entitled to arrears of two years' preference dividends before ordinary shareholders are paid, because "cumulative" fixes that priority. If the shares were non-cumulative, the arrears would be lost.
Traps
Assuming all preference shares are cumulative; confusing nominal value with market value; allowing a dividend out of capital; permitting directors to allot without authority.