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CS Executive · Company Law and Practice · Members and Shareholders

Ganga Foods Ltd has not paid dividend on its 9% cumulative preference shares for the last three years. At the annual general meeting, an ordinary resolution to appoint an auditor is placed, which does not affect preference rights. Can the holders of these preference shares vote on it?

Yes. Under the second proviso to section 47(2), when dividend on a class of preference shares remains unpaid for two years or more, that class may vote on all resolutions placed before the company, so the three-year default qualifies them.

  1. ANo, they vote only on resolutions affecting their own rights
  2. BYes, as dividend on that class is unpaid for two years or more, they can vote on all resolutionsCorrect
  3. CYes, but only if dividend is unpaid for five years
  4. DNo, they can vote only on winding up resolutions

Explanation

The second proviso to section 47(2) says that where dividend on a class of preference shares has not been paid for two years or more, that class has a right to vote on all resolutions placed before the company. Three years of non-payment satisfies this, so the general limitation does not apply.

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