Issue of shares without voting rights /dividend rights
-The term ‘voting right’ is defined in Section 2(93) of Companies Act, 2013, as “Voting right” means the right of a member of a company to vote in any meeting of the company.
-Dividend right is not defined under Companies Act,2013 but in general sense it means a right of a member to get the dividend on the shares of the Company.
Opening paras of the Section 47 (Voting Rights) of the Companies Act,2013 starts with “subject to the provisions of section 43”.
Section 43 of the Companies Act,2013 deals with the provisions of differential voting rights and as per the provisions, a Company may issue equity shares with voting rights or with differential rights as to dividend, voting or otherwise in accordance with rule 4 of the Companies (Share Capital and Debentures) Rules, 2014 of the Companies Act, 2013.
Further, as per the MCA notification dated June 05, 2015, Private Companies subject to memorandum or articles of association have been given exemption from Section 43 and 47 of the Companies Act,2013.
Interpretation:
1. In a view of above stated provision read with the MCA notification dated June 05, 2015, it may be said that a Private Company may issue shares without voting or dividend rights subject to the provisions of articles of the Company and there is no need to comply with the provisions and procedure given under Section 43 and 47 read with rule 4 of the Companies (Share Capital and Debentures) Rules, 2014 of the Companies Act,2013.
2. Unlisted Public Companies after following the provisions of section 43 read with rule 4 of the Companies (Share Capital and Debentures) Rules, 2014 of the Companies Act, 2013, may issue shares carrying no voting rights/dividend rights.
Therefore, it is seeming that all Private/Unlisted Public Companies who wish to raise funds by structuring their capital can raise the funds without dilution of control.
Conclusion
Both private company as well as public company may issue shares carrying no voting or dividend right. But if the Public company wants to issue shares carrying no voting and dividend right then the company shall not do so, As Section 43 of the Companies Act,2013 is allowing either to issue differential rights as to dividend “or” voting.
However, a private company may issue shares carrying no voting and dividend right as subject to its memorandum or articles of association it may exempt itself from complying Section 43 and 47 of the Companies Act,2013.
For instance, a Private Company may issue shares carrying no voting and dividend right by putting a condition that whenever the company will buy back the shares then it will give 5 times consideration above the fair value of the shares to its members. shares to its members.
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