Voting Rights of the Shareholders 

Introduction of Section 47 of the Companies Act, 2013

Every member of the company limited by shares holding equity share capital has right to vote in Company. Rights can be varied as per section 43(a) of the Companies Act, 2013; for private limited company section 47 is not applicable where memorandum or articles of the company so provides (exemption granted through the  Notification dated 5th june, 2015.)

Voting Rights of Shareholders

There can be two kinds of share capital in the company

1. Equity Share Capital

2. Preference share capital

 

Prevailing Sections on Voting Rights:

1. Section 47 of the Companies Act, 2013 subject to

2. Section 43 of the Companies Act, 2013 &

3. Section 50(2) of the Companies Act, 2013 &

4. Section 188(1) of the Companies Act, 2013

5. Section 106 of the companies act, 2013

Act about Voting Rights:

1. There are two kinds of shareholders in the company Equity Shareholders and Preference Shareholders. Voting rights of both are given in Section 47 of the Companies Act, 2013

2. Every equity shareholders have right to participate in the general meeting held by the company and vote on every resolution placed before the company as per section 47(1)(a) of the Act [Notice to be served to every equity holders per section 101 of the Companies Act, 2013]

3. Voting right on a poll shall be in proportion to their share in the paid-up equity share capital of the company as per Section 47(1)(a) of the Companies Act, 2013

[ In case of Nidhi company -clause (b) of Sub-section (1) of Section 47 shall apply, subject to the modification that no member shall exercise voting rights on poll in excess of five per cent, of total voting rights of equity shareholders.  – Notification dated 5th june, 2015]

4. Every member holding preference share capital of the company have right to vote only on the agenda/resolutions placed before the company which directly affect the rights attached to their share as below;

  • Resolution for winding up of the company
  • Resolution for repayment of the company
  • Reduction of equity share capital
  • Reduction of preference share capital

(voting rights on poll shall be in proportion to his shares in paid up preference share capital of the company)

Provided that the proportion of the voting rights of equity shareholders to the voting rights of the preference shareholders shall be in the same proportion as the paid-up capital in respect of the equity shares bears to the paid-up capital in respect of the preference shares

Provided further that where the dividend in respect of a class of preference shares has not been paid for a period of two years or more, such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

Voting rights for equity share capital can differ as per issuance of the shares namely: –

  • Issue of Equity shares with voting rights
  • Issue of equity shares with differential rights with
    • Dividend
    • Voting
    • Otherwise as prescribed in the rule 4 of the Companies (Share Capital and Debentures) Rules, 2014

[the voting power in respect of shares with differential rights of the company shall not exceed seventy-four per cent (74%). of total voting power including voting power in respect of equity shares with differential rights issued at any point of time]

  • If a member of the company has subscribed to the share of company which is unpaid (amount called but not paid by the member) than he shall not be entitled to any voting rights in respect of the amount paid up by him which has been called up. (as per Section 50 of the Companies Act, 2013)
  • No member of the company shall vote on such resolution in which he is considered as interested/related. (definition of related party provided under section 2(76) of the companies act, 2013)
  • Notwithstanding anything contained in this Act, the articles of a company may provide that no member shall exercise any voting right in respect of any shares registered in his name on which any calls or other sums presently payable by him have not been paid, or in regard to which the company has exercised any right of lien. (as per section 106(1) of the companies act, 2013)
  • A company shall not, except on the grounds specified in sub-section (1), prohibit any member from exercising his voting right on any other ground. (Section 106(2) of the Companies Act, 2013)
  • A member entitled for more than one vote or his proxy can also vote wherever it is allowed in the meeting taken on a poll, his votes or cast in same way all the votes he uses (Section 106(3) of the companies act, 2013)

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