Question

Define class voting. Why would a group of investors be interested in a guarantee of class voting?

Answer 1

Class voting is a voting method in which shareholders holding different class of shares undertake voting on a separate basis for proposed changes in the corporate protocol which affect each class of shares and shareholders.

This is important for a group of investors as it is possible that the initial investors holding Class A shares and having greater voting rights may not be willing to dilute their rights when the firm raises money by issuing further shares which may be classified Class B shares. So in order to protect rights of a class of shareholders and their voting rights, this is necessary.