Only a company limited by shares can issue equity shares with differential rights as to dividend, voting or otherwise. Such company has to comply with certain conditions.The company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and viceversa. The Board of Directors are required to disclose the details of the issue of equity shares with differential rights in the Board’s Report for the financial year in which was completed. The holders of the equity shares with differential rights enjoys all other rights such as bonus shares, rights shares etc., which the holders of equity shares are entitled to, subject to the differential rights with which such shares have been issued.

PROCEDURE FOR ISSUE OF EQUITY SHARES WITH DIFFERENTIAL VOTING RIGHTS

  • Check whether the Articles of Association of the company authorizes issue of equity shares with differential rights and if not, the name and the Articles of Association of the company.
  • Hold the Board meeting to issue the notice of general meeting for the issue of equity share with differential rights.
  • Before issuing equity shares with differential rights as to dividend, voting or otherwise, ensure that the conditions of issue are fully satisfied
  • If the company is listed with any of the recognized stock exchange, then within 15 minutes of the closure of the aforesaid Board Meeting intimate to the concerned Stock Exchange about the decision taken at the Board Meeting.
  • Pass the ordinary resolution in the general meeting or through Postal Ballot under section 110 of the Act.
  • Once the company makes any allotment, then it shall, within 30 days thereafter, file with the Registrar a return allotment in Form PAS-3, along with the fees as specified in the Companies (Registration Offices and Fees) Rules, 2014.
  • The company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and vice–versa.
  • In case of listed company, send copies of the notice and a copy of the proceedings of the general meeting to the stock exchange within 24 hours of the occurrence of event. [Regulation 30 (6) of SEBI (Listing Obligations and Disclosure Requirements), 2015]
  • Complete all other proceedings for the issue of certificate of shares with differential voting rights making necessary entries in various registers. In case of a company whose shares are dematerialized form, inform the depositories about the same for credit to the respective accounts.
  • Intimate the details of allotment of shares to the Depository immediately on allotment of such shares.
  • Maintain the Register of Members under section 88 containing all the relevant particulars of the shares so issued along with details of the shareholders

DISCLAIMER: THE ARTICLE IS BASED ON THE RELEVANT PROVISIONS AND AS PER THE INFORMATION EXISTING AT THE TIME OF THE PREPARATION.IN NO EVENT I SHALL BE LIABLE FOR ANY DIRECT AND INDIRECT RESULT FROM THIS ARTICLE. THIS IS ONLY A KNOWLEDGE SHARING INITIATIVE.

THE AUTHOR CAN BE REACHED AT VINAYAK.CHARU@GMAIL.COM

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