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New Zealand law explained for everyone

Companies Act 1993

Shareholders and their rights and obligations - Interest groups

117: Alteration of shareholder rights

You could also call this:

“Changing shareholder rights requires approval from affected groups”

You need to know about how a company can change the rights of its shareholders. A company can’t do anything that affects the rights attached to shares unless all the groups of shareholders with those rights agree to it. This agreement must be made through a special vote.

The rights attached to a share include things like voting rights and rights to get money from the company. They also include the right to buy new shares before others can, and the right to have the company follow certain procedures when changing these rights.

When a company issues new shares that are equal to or more important than existing shares, it’s seen as affecting the rights of the existing shares. However, this doesn’t apply if the company’s rules specifically allow it, or if the new shares are being offered to existing shareholders first in line with the rules.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320609.

Topics:
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Part 7 Shareholders and their rights and obligations
Interest groups

117Alteration of shareholder rights

  1. A company must not take action that affects the rights attached to shares unless that action has been approved by a special resolution of each interest group.

  2. For the purposes of subsection (1), the rights attached to a share include—

  3. the rights, privileges, limitations, and conditions attached to the share by this Act or the constitution, including voting rights and rights to distributions:
    1. pre-emptive rights arising under section 45:
      1. the right to have the procedure set out in this section, and any further procedure required by the constitution for the amendment or alteration of rights, observed by the company:
        1. the right that a procedure required by the constitution for the amendment or alteration of rights not be amended or altered.

          1. For the purposes of subsection (1), the issue of further shares ranking equally with, or in priority to, existing shares, whether as to voting rights or distributions, is deemed to be action affecting the rights attached to the existing shares, unless—

          2. the constitution of the company expressly permits the issue of further shares ranking equally with, or in priority to, those shares; or
            1. the issue is made in accordance with the pre-emptive rights of shareholders under section 45 or under the constitution of the company.

              Notes
              • Section 117(3)(b): amended, on , by section 14 of the Companies Act 1993 Amendment Act 1994 (1994 No 6).