I note that the constitution has "suggested share classes". How do the share classes work, and do I need to use the suggested share classes and labels?
Unfortunately, there is no such thing as "standard" rights attaching to different classes of shares. Therefore, an "A" class share for one company may have entirely different rights to that of an "A" class share in another company.
Under subclause 4(b) of our constitution, the directors of the company can issue shares "to such persons on such terms and at such times and with such preferred, deferred or other special rights, whether with regard to dividend, voting, return of capital or otherwise, as the Directors think fit".
The directors give effect to this (i.e., giving shares special rights) by setting out those rights in the directors' resolution authorising the issue of the shares.
Subclause 8(c) allows shares to be issued with the rights suggested in Schedule 1:
"Without limiting in any way the classes of shares that the Company may issue or the rights that may attach to any classes of shares or the variation of such classes or rights, the Company may issue new shares, or (subject to this clause) vary existing shares, of a designated class and with rights attaching to that class as suggested in Schedule 1 to this Constitution".
However, many of our members want to use their own class system when issuing shares, rather than using the classes and rights suggested in Schedule 1.
Therefore, if members want to use the suggested classes in Schedule 1, they can simply order a company with shares designated with those particular class "names" (eg, "AA", "BB", etc). Note that, originally, the constitution did not have any "suggested" classes, but this was later incorporated on the request of some members, and we now use "AA", "BB" etc, as these are less likely to cause confusion and/or conflict with orders from members who wish to use their own class system, without knowing of the rights attaching to the suggested classes.
If they designate the shares with something other than those used in Schedule 1, then the directors of the company will need to specify what special rights, if any, attach to those classes of shares. Where we are instructed what special rights attach, this is incorporated into the first directors' resolution of the company. If not, unless the company has otherwise documented the rights that attach to the shares (we get so many orders separating shares into different classes, that it is clear that many members may have their own system), then the shares will simply have the rights attaching to ordinary shares. That is, the shares will carry a right to vote, a right to dividends declared for those shares, and a right to a proportionate share of capital on winding up of the company.
If this was not the intention, then the directors may be able to recognise or affirm, by resolution, that the original issue of shares was meant to carry certain rights, though legal advice may need to be sought on the efficacy of this if there is nothing else documenting this intention.
Otherwise a special resolution of the company can change the rights attaching to shares (refer, eg, subclause 8(a)), though, again, legal advice may need to be sought on the consequent effects of this.