Conditions For Issuing Shares With Differential Rights
Rule 4 of Companies (Share
Capital and Debentures) Rules, 2014
Capital and Debentures) Rules, 2014
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 the following
conditions, namely:-
a company limited by shares can issue equity shares with differential rights as
to dividend, voting or otherwise. Such company has to comply with the following
conditions, namely:-
(a) the articles of association of the company
authorizes the issue of shares with differential rights;
authorizes the issue of shares with differential rights;
(b) the issue of shares is authorized by an
ordinary resolution passed at a general meeting of the shareholders. When the
equity shares of a company are listed on a recognized stock exchange, the issue
of such shares shall be approved by the shareholders through postal ballot.
(Though with Companies (Amendment) Act, 2017 coming into force, any item of
business required to be transacted by means of postal ballot, may be transacted
at a general meeting by a company which is required to provide the facility to
members to vote by electronic means under section 108).
ordinary resolution passed at a general meeting of the shareholders. When the
equity shares of a company are listed on a recognized stock exchange, the issue
of such shares shall be approved by the shareholders through postal ballot.
(Though with Companies (Amendment) Act, 2017 coming into force, any item of
business required to be transacted by means of postal ballot, may be transacted
at a general meeting by a company which is required to provide the facility to
members to vote by electronic means under section 108).
(c) the voting power in respect of shares with
differential rights of the company shall not exceed seventy four percent of
total voting power including voting power in respect of equity shares with
differential rights issued at any point of time;
differential rights of the company shall not exceed seventy four percent of
total voting power including voting power in respect of equity shares with
differential rights issued at any point of time;
(d) the company has not defaulted in filing
financial statements and annual returns for three financial years immediately
preceding the financial year in which it is decided to issue such shares;
financial statements and annual returns for three financial years immediately
preceding the financial year in which it is decided to issue such shares;
(e) the company has no subsisting default in the
payment of a declared dividend to its shareholders or repayment of its matured
deposits 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;
payment of a declared dividend to its shareholders or repayment of its matured
deposits 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;
(f) the company has not defaulted in payment of the
dividend on preference shares or repayment of any term loan from a public
financial institution or State level financial institution or scheduled 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 Government;
dividend on preference shares or repayment of any term loan from a public
financial institution or State level financial institution or scheduled 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 Government;
A company may issue equity
shares with differential rights upon expiry of five years from the end of the
financial year in which such default was made good.
shares with differential rights upon expiry of five years from the end of the
financial year in which such default was made good.
(g) 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 Foreign Exchange Management Act, 1999 or any other special Act, under
which such companies being regulated by sectoral regulators.
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 Foreign Exchange Management Act, 1999 or any other special Act, under
which such companies being regulated by sectoral regulators.
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