Voting Rights Of Shareholders

Common stock shareholders in a company have certain rights relevant to their equity investment. A significant right of shareholders is the right to vote on definite corporate matters. Shareholders characteristically have the right to vote in elections for the board of directors and on anticipated corporate changes namely, change of corporate endeavour and goals or elemental structural changes. In this article, we look at the provisions in Companies Act, 2013, restrictions and special cases related to voting rights on shares. Know more about conducting board meeting on video conference.

Voting Rights

Section 47 of the Companies Act 2013 relates to Voting Rights Of Shareholders in a Company. The following are some of the highlights of the provisions in Companies Act. Each member of a company that is limited by shares in adding up to holding equity share capital in that will have a right to vote on every resolution related to the company. The voting right on a poll will be in percentage of his share in the paid-up equity share capital associated with the company. Hence, if a shareholder owns 51% of the company in terms of paid-up equity, he will have the rights to exercise majority control over the company.

Restriction on Voting Rights

The 1 can place certain restrictions on the voting rights of a shareholder. For example, in the articles of association of most companies, there will be a restriction on the voting rights of shares on which a call or one-time sums at the moment liable to be paid has not been paid.

Unpaid Share Capital

A company possibly will, if so authorised by its articles, acknowledge from every member, the complete or a component of the amount remaining unpaid on any shares held by him, even if no fraction of that amount has been called up. A member of the company limited by shares will not be entitled to any voting rights with reference to the amount paid by him relevant to sub-section (1) until that amount has been called up.

Voting Rights in case of Pledge or Attachment

The voting right of shareholders as decided upon them by section 47 remains essential in spite of the piece of proof that the shares have been rendered definite by the related shareholders of their shares have been integrated or a receiver has been chosen with reference to their shares. The shareholders can make an application for a meeting and vote at a meeting with reference to section 100 of the Act, irrespective of the undertaking or attachment of his shares in addition to a selection of a receiver.

How Voting is Conducted

The voting rights related to shares are voting rights at general meetings of the company, namely at meetings of the shareholders to a certain extent than the directors. Voting at general meetings can be completed in two diverse ways. Numerous resolutions are settled by a display of hands. This will provide every shareholder one vote, in spite of the number of shares held. It is a helpful practice for the passing of routine resolutions where there is no (or very little) opposition but does not be a sign of the actual voting strength of individual shareholders. For this to be completed there should be a poll, according to which the definite votes owned by every shareholder voting are counted.

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Frequently Asked Questions

Common questions about Voting Rights of Shareholders under Companies Act 2013.

According to Section 47 of the Companies Act, 2013, each member of a company that is limited by shares and holds equity share capital will have a right to vote on every resolution related to the company. The voting right on a poll will be in proportion to their share in the paid-up equity share capital of the company.

Yes, the articles of association of a company can place certain restrictions on the voting rights of a shareholder. For example, most companies restrict the voting rights of shares on which a call or outstanding payment is due and unpaid.

The voting rights of shareholders as granted by Section 47 remain unaffected even if their shares have been pledged or attached, or if a receiver has been appointed for their shares. The shareholders can still apply for a meeting and vote at a meeting as per Section 100 of the Act.

Voting at general meetings can be conducted in two ways - show of hands or poll. A show of hands gives each shareholder one vote, irrespective of the number of shares held. In a poll, the actual votes held by each voting shareholder are counted.

Yes, shareholders typically have the right to vote in elections for the board of directors of the company, as mentioned in the article.

Yes, the article states that shareholders characteristically have the right to vote on anticipated corporate changes, including a change of corporate endeavour and goals or fundamental structural changes.

In a poll, the voting strength or number of votes held by a shareholder is determined by the percentage of their share in the paid-up equity share capital of the company.

Yes, a company may, if authorized by its articles, accept from every member the full or a part of the amount remaining unpaid on any shares held by them, even if no part of that amount has been called up.

A member who has paid an amount in advance for unpaid share capital will not be entitled to any voting rights in respect of that amount until it has been called up by the company.

The article does not explicitly mention whether a shareholder with unpaid share capital can vote at general meetings. However, it states that most companies restrict the voting rights of shares on which a call or outstanding payment is due and unpaid.