Issue of shares

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ganesh nikam

ganesh nikam (Querist)
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12 February 2013 Can Company Issue Equity Shares With Disappropriates Right?

Ajay Mishra

Ajay Mishra (Expert)
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12 February 2013 Hi

You can issue with differential voting rights.

Issue of Equity Shares with Differential Voting Rights
A company which proposes to issue equity shares with differential voting rights has to comply with the requirements of the Companies (Issue of Share Capital with Differential Voting Rights) Rules, 2001 and it has to check the following points and must ensure that the company is eligible for issuance of these shares:—
(a) A company limited by shares may issue equity shares with differential rights as to dividend, voting or otherwise.
(b) The following requirements shall be fulfilled:—
— the company has distributable profits in terms of section 205 for preceding 3 financial years preceding the year in which it was decided to issue such shares;
— the company has not defaulted in filing of annual accounts and annual returns for 3 financial years immediately preceding the financial year of the year in which it was decided to issue such share;
— the company has not failed to repay its deposit or interest thereon on due date or redeem its debentures on due date or pay dividend;
— the articles of association of the company authorises the issue of shares with differential voting rights;
— the company has not been convicted of any offence arising under Securities and Exchange Board of India Act, 1992, Securities Contracts (Regulation) Act, 1956, Foreign Exchange Management Act, 1999; and
— the company has not defaulted in meeting investors' grievances.
(c) The company shall obtain the approval of the shareholders in general meeting by passing resolution as per section 94.
(d) In the case of a listed company, the approval of shareholders shall be obtained through postal ballot.
(e) The notice of meeting of the resolution shall be accompanied by an explanatory statement stating:—
— the rate of voting right which the equity share capital with differential voting right shall carry;
— the scale or proportion to which the voting rights of such class or type of shares will vary;
— the company shall not convert its equity capital with voting rights into equity share capital with differential voting rights and the shares with differential voting rights into equity share capital with voting rights;
— the shares with differential voting rights shall not exceed 25% of the total share capital issued;
— that a member of the company holding any equity share with differential voting rights shall be entitled to bonus shares, right shares of the same class;
— the holders of the equity shares with differential voting rights shall enjoy all other rights to which the holder is entitled to except right to vote as indicated above.
(f) A Register shall be maintained as required under section 150 containing the particulars of differential rights to which the holder is entitled.

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ganesh nikam

ganesh nikam (Querist)
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13 February 2013 Thank you Sir

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