Business Laws and Ethics · Rights of Shareholders

Voting Rights of Shareholders under Section 47

Updated 10 October 2026 · Fact-checked

Section 47 of the Companies Act, 2013 says every equity shareholder can vote on every resolution, and on a poll the vote is in proportion to paid-up equity capital. Preference shareholders vote only on limited matters, unless their dividend is unpaid for two years or more. To solve problems, identify the class, the resolution and the dividend status.

Understand Voting Rights of Shareholders (Section 47)

A share gives you a part ownership of a company. Voting right is the power to take part in decisions by voting on resolutions. Section 47 tells you who can vote, on what, and how many votes each holder gets.

Equity shareholders. Under Section 47(1), every member of a company limited by shares and holding equity share capital has a right to vote on every resolution placed before the company. On a poll, the voting right is in proportion to the member's share in the paid-up equity share capital. So a holder of 10% of the paid-up equity capital has 10% of the votes on a poll. This rule is subject to Section 43, Section 50(2) and Section 188(1). Section 43 allows equity shares with differential rights as to dividend, voting or otherwise, as per prescribed rules. So one share one vote is the general rule, not an absolute one.

Preference shareholders. Under Section 47(2), a preference shareholder can vote only on resolutions that directly affect the rights attached to the preference shares, and on any resolution for winding up the company or for repayment or reduction of its equity or preference share capital. On a poll, the vote is in proportion to the share in the paid-up preference share capital.

There are two provisos. First, the voting rights of equity holders and preference holders stand in the same proportion as the paid-up equity capital bears to the paid-up preference capital. Second, if the dividend on a class of preference shares has not been paid for two years or more, that class gets the right to vote on all resolutions placed before the company.

Think of it this way: equity holders carry the residual risk, so they get the full say. Preference holders get a fixed, preferred return, so they get a say only when their own position is at stake or when their dividend is in default.

Key rules to remember

Equity voting right: Every equity member may vote on every resolution; poll votes ∝ share in paid-up equity share capital; Section 47(1). Subject to Sections 43, 50(2) and 188(1).
Equity member's share of poll votes: Member's poll votes ÷ total equity poll votes = Paid-up equity held by member ÷ Total paid-up equity capital; Use paid-up amount, not just the number of shares, when shares are partly paid or have different face values.
Preference voting right (general): Vote only on (a) resolutions directly affecting rights of the preference shares, (b) winding up, (c) repayment or reduction of equity or preference share capital; Section 47(2). Poll votes are in proportion to paid-up preference capital.
Proportion proviso: Equity voting rights : Preference voting rights = Paid-up equity capital : Paid-up preference capital; First proviso to Section 47(2).
Default exception: Preference dividend unpaid for 2 years or more → that class votes on all resolutions; Second proviso to Section 47(2). Applies to the class whose dividend is unpaid.

How to solve Voting Rights of Shareholders (Section 47) questions

Use this method for any question on voting rights, whether it is theory, a case study or a numerical on poll votes.

1Identify the class of shares held: equity or preference. Note if the equity shares carry differential rights.
2Identify the resolution: ordinary business, one affecting preference rights, winding up, or a capital repayment or reduction.
3For equity holders, state that they can vote on every resolution under Section 47(1), subject to Sections 43, 50(2) and 188(1).
4For preference holders, check whether the resolution falls in the permitted list under Section 47(2).
5Check the dividend status. If dividend on that class is unpaid for two years or more, the class can vote on all resolutions.
6For a poll, compute votes in proportion to paid-up capital of that class. Use the paid-up amounts.
7Write the conclusion in one line with the section reference.

Quickest way: Three-question check

When to use it: For MCQs and short case studies where you have under two minutes.

Ask: equity or preference? If equity, the answer is usually yes, they can vote, and poll votes follow paid-up equity.
If preference, ask: does the resolution affect their rights, or is it winding up or capital repayment or reduction? If yes, they vote.
Otherwise ask: is the dividend unpaid for two years or more? If yes, they vote on everything; if no, they cannot vote.

Common mistakes in Voting Rights of Shareholders (Section 47)

Saying preference shareholders have no voting right at all.
Students remember that preference shares are non-voting in everyday talk.
Fix: Remember Section 47(2) gives a limited right, plus a full right when dividend is unpaid for two years or more.
Applying the two-year default rule to all preference classes together.
The proviso is read loosely.
Fix: The proviso refers to a class of preference shares whose dividend is unpaid. Apply it to that class.
Calculating poll votes by number of shares when shares are partly paid.
Students assume one share equals one vote on a poll.
Fix: Section 47(1)(b) links the vote to the share in paid-up equity capital. Compute using paid-up amounts.
Treating one share one vote as an absolute rule.
It is the common summary of the section.
Fix: Add that Section 47(1) is subject to Section 43, which permits equity shares with differential rights as to voting, in accordance with the prescribed rules.
Forgetting the voting rights on a show of hands versus a poll.
The section text mentions only poll proportion.
Fix: Section 47 fixes proportion on a poll. Do not claim it fixes the count on a show of hands.

Worked examples

Example 1

Alpha Ltd has paid-up equity share capital of ₹80,00,000 and paid-up preference share capital of ₹20,00,000. Mr. Rao holds equity shares with paid-up value ₹8,00,000. On a poll for an ordinary resolution, what share of the total equity votes does he hold? Can the preference shareholders vote on this resolution if their dividend has been paid regularly?

Show the solution

Equity poll votes are in proportion to paid-up equity capital under Section 47(1)(b).
Mr. Rao's share = ₹8,00,000 ÷ ₹80,00,000 = 10%.
The resolution is ordinary. It does not affect preference rights, winding up, or capital repayment or reduction.
Under Section 47(2), preference holders vote only on those matters, and their dividend is not in default, so the exception does not apply.

Answer: Mr. Rao holds 10% of the equity votes on the poll. The preference shareholders cannot vote on this resolution.

Example 2

Beta Ltd has not paid dividend on its 8% preference shares for the last three years. The company proposes an ordinary resolution to appoint a new auditor. Can the preference shareholders vote? Give the legal basis.

Show the solution

Preference holders normally vote only on resolutions directly affecting their rights, winding up, or repayment or reduction of capital.
The appointment of an auditor is not in that list.
Check the second proviso to Section 47(2): where dividend on a class of preference shares is unpaid for two years or more, that class has a right to vote on all resolutions.
Dividend has been unpaid for three years, which is more than two years, so the proviso applies.

Answer: Yes. Because dividend on the class has been unpaid for two years or more, the preference shareholders can vote on all resolutions, including the auditor appointment, under the second proviso to Section 47(2).

Exam tips

In a case study, underline the class of shares, the resolution type and the dividend history. These three facts decide the answer.
Quote Section 47(1) for equity and Section 47(2) with its two provisos for preference. Examiners look for the section reference.
For a difference between equity and preference voting, write a two-column answer: scope of vote, basis on a poll, effect of dividend default.
Mention that Section 47(1) is subject to Sections 43, 50(2) and 188(1) to show complete knowledge.
In MCQs, watch for words like all resolutions and only. They often signal the dividend default exception.

Practice questions from Rights of Shareholders

Voting Rights of Shareholders (Section 47) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Voting Rights of Shareholders (Section 47): frequently asked questions

Do equity shareholders always get one vote per share?

Section 47(1) gives equity members a right to vote on every resolution, and on a poll the vote is in proportion to their share in paid-up equity capital. It is subject to Section 43, which allows equity shares with differential rights as to voting under the prescribed rules.

When can preference shareholders vote?

They can vote on resolutions directly affecting their preference shares, and on resolutions for winding up or for repayment or reduction of equity or preference share capital. They can vote on all resolutions if dividend on their class is unpaid for two years or more.

What is the difference between voting rights of equity and preference shareholders?

Equity holders can vote on every resolution. Preference holders can vote only on limited matters unless their dividend is in default for two years or more. Both vote on a poll in proportion to the paid-up capital of their own class.

Does Section 47 mention voting by show of hands?

The text of Section 47 speaks of voting on a poll in proportion to paid-up capital. For the procedure of voting by show of hands, refer to the relevant provisions on general meetings rather than quoting Section 47.