ISSUE OF SHARE WITH DIFFERENTAL VOTING RIGHT

SHARE WITH DIFFERENTAL VOTING RIGHT

Section 43 enables companies to issue equity share with differential right. Rule 4 of companies (share capital and debenture) rules 2014 stated that no company shall issue equity share with differential right unless following conditions are satisfied.

1.       It must be authorized by the article of association.

2.       An ordinary resolution is required to be passed in a duly convened general meeting. If share of the company listed in a stock exchange resolution should be passed through postal ballot.

3.       The share with differential voting right shall not exceed 26% of the post issue paid-up capital including the share issued with differential voting right.

4.       The company having the consistent track record of distributable profit during the last three year.

5.       The company has not defaulted to file annual account and annual return for three financial year immediately preceding the financial year in which it is decided to issue equity share with differential right.

6.       The company has no subsisting default in the payment of a declared dividend to its shareholder or repayment of its matured deposit or redemption of its preference shares or debentures that have become due for redemption or payment of interest on such deposits or debentures or payment of dividend.

7.       The company has not defaulted in payment of the dividend on preference shares or repayment of any term loan a public financial institution or state level financial institution or schedule bank that has become repayable or interest payable thereon or dues with respect to statutory payments relating to its employees to any authority or default in crediting the amount in investor education and protection fund to the central govt.

8.       The company has not been penalized by court or tribunal during the last three years of any offence under the RBI act 1934, the SEBI act 1992, the securities contracts regulation act 1956 the FEMA act 1999 or any other special act, under which such companies being regulated by sectoral regulators.

9.       Details of issue to be disclosed in the board’s report.

10.   Register of members to contain the details of share with differential voting rights.

11.   Conversion of existing equity share capital into differential voting rights and vice-versa is not possible.