(1)This section applies where the rights attached to any class of shares in a company are varied under section 630 (variation of class rights: companies having a share capital).
(2)The holders of not less in the aggregate than 15% of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled.
For this purpose any of the company's share capital held as treasury shares is disregarded.
(3)If such an application is made, the variation has no effect unless and until it is confirmed by the court.
(4)Application to the court—
(a)must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be), and
(b)may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(5)The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation, and shall if not so satisfied confirm it.
The decision of the court on any such application is final.
(6)References in this section to the variation of the rights of holders of a class of shares include references to their abrogation.
Cases considering section 633 (3)
[2023] EWCA Civ 1142 · 9 October 2023Limits
The court left open whether section 633 applied to a variation effected under articles rather than section 630. Assuming that it applied, unfair prejudice had to be assessed judicially by reference to rational principles, including the parties’ agreed corporate terms and any equitable constraints (see paras [100]-[105]).
[2023] EWHC 704 (Ch) · 21 March 2023
The court considered the claimants’ alternative application to cancel a variation of class rights. It held that the claim would have failed because the prejudice, although assumed, would not have been unfair. The claim nonetheless provided proper interim protection and justified only a 10 per cent costs reduction (see paras [7]–[9], [13]–[19]).
The court recognised that an application under section 633(3) prevented the variation from taking effect unless and until confirmed by the court. That interim restraint was properly obtained because the conversion was ultimately declared invalid, although the statutory claim added only limited work to the proceedings (see paras [9], [14]–[18]).
[2023] EWHC 437 (Ch) · 8 March 2023Interprets
The court held that section 633 potentially applies to variations effected under a provision in the articles as well as under the statutory default procedure. The alternative claim nevertheless failed because the claimants established prejudice but not unfair prejudice. (see paras [15], [115]-[123])
The court construed section 633(1) as applying where rights are varied under section 630, including where the relevant power is found in the articles. (see para [116])
The court accepted that the claimants were qualified applicants and that the application was made within the relevant period. The provision formed part of the jurisdictional framework but was not independently disputed at trial. (see paras [15], [53], [116])
The provision was considered in the defendant’s argument that section 633 creates a broad moratorium. The court rejected the defendant’s narrow construction of the section but did not decide the point by reference to the moratorium. (see paras [73], [116])
The court held that the applicant bears the burden of establishing both prejudice and unfairness. If unfair prejudice is not established, the court must confirm the variation. On the assumed hypothesis of an authorised variation, the claimants failed to prove unfair prejudice. (see paras [117]-[123])
The provision confirms that variation includes abrogation. It supported the court’s treatment of the extinguishment of preferred rights as a variation or abrogation for the statutory analysis. (see paras [15], [103]-[105], [116])
What each judgment says about section 633 is in the case-law panel in the full Act.
941.Section 633 replaces section 127 (which confers a right on shareholders to object to a variation of class rights). It sets out the procedure that must be followed where there is an objection to a variation of the rights attached to a class of a company’s shares and enables shareholders holding not less in aggregate than 15% of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution approving the variation) to apply to the court for the variation to be cancelled.
942.Section 634 makes similar provision in respect of a variation of class rights in companies not having a share capital. This is a new provision which enables members, amounting to not less than 15% of the members of the class affected (being persons who did not consent to or vote in favour of the resolution approving the variation), to apply to the court to have the variation cancelled and gives the court the power to confirm the variation, or disallow it if the court is satisfied that it would unfairly prejudice the members in that class.