Safe and Sound Ltd is a public company whose business is the manufacture and sale of home security systems.
Only 100,000 shares have been issued: Kate Smith and her sister Sarah each hold 30,000 "A" class shares; their mother owns 10,000 "A" class shares; their brother, Jim, owns 5,000 "A" class shares; and their other brother, Rob owns 25,000 "B" class shares. The voting rights and powers of the A and B class shares are the same. Jim, Kate and Sarah are the company's directors. The company has traded successfully for a number of years. Indeed, in January 1998 its "A" class shares were independently valued as being worth $100 each, and its "B" class shares as being worth $150 each.
The company adopted the replaceable rules of the Corporations Act in its constitution, which also contains the following provision:
"The "B" class shares carry with them the right to vote and be paid a 12% dividend before any payment of dividend is made to "A" class shareholders, in any financial year".
Rob has received notice of an extraordinary general meeting to be convened in one month's time. The notice informs him that certain motions will be proposed at the meeting. The proposed motion to be proposed motion is for a new provision to be inserted into the company's constitution to the effect that "B" class shares are to carry no right to vote at company meetings.
Advise Rob of the legality of these motion and his rights to challenge it, if passed.