Rights of holders of classes of shares
Section 65 of the Act states and protects the rights of holders of classes of shares from a variation of class right. Section 65 provides statutory protection to the holders of a class of shares against the rights on their shares being altered. A minority class of shares, or a class of non-voting shares, would be vulnerable to their rights being altered by the majority who could discriminate against the minority shareholders by altering the articles by special resolution.
Under Section 65 of the Act, holders of a class of shares may apply to the Court to have a variation or abrogation cancelled. Holders of such a class of shares also have the protection of the Court that if there is any application for a variation or abrogation, it shall not have any effect until confirmed by the Court.
Section 65 of the Act applies in circumstances where the share capital of a company is divided into different classes of shares, and when the memorandum or articles authorised the variation or abrogation of the rights attached to any class of shares in the company.
Section 65(2) of the Act states that an application shall not be invalid by reason of the applicants or any of them having consented to or voted in favour of the resolution for the variation or abrogation if the Court is satisfied that any material fact was not disclosed by the company to those applicants before they so consented or voted.
The application shall be made within one month after the date on which the consent was given or the resolution was passed or such further time as the Court allows, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they appoint in writing, as provided in Section 65(3).
On the application, under Section 65(4) Companies Act 1965, the Court, after hearing the applicant and any other persons who apply to the Court to be heard , the Court may, if satisfied and having regard to all the circumstances of the case that the variation or abrogation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation or abrogation as the case may be and shall, if not so satisfied, confirm it, and the decision of the Court shall be final.
The company shall within fourteen days after the making of an order by the Court on any such application lodge an office copy of the order with the Registrar and if default is made in complying with this provision, the company and every officer of the company who is in default shall be guilty of an offence against this Act. The default penalty or an offence against this Act is two thousand ringgit under Section 62(5) Companies Act 1965.