Skip to content

CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Meghna Pharma Ltd has paid-up equity capital of Rs 60 lakh and paid-up preference capital of Rs 40 lakh. A resolution to reduce preference share capital is put to a poll. Under Section 47, how are the voting rights of equity and preference shareholders on this poll related?

Voting rights of equity and preference shareholders are kept in the same proportion as their paid-up capital. With Rs 60 lakh equity and Rs 40 lakh preference capital, the ratio is 60:40, or 3:2, so neither equal voting power nor a 3:1 split applies.

  1. AEquity and preference holders have equal total voting power irrespective of paid-up capital
  2. BTheir voting rights are in the same proportion as the paid-up equity capital bears to paid-up preference capital, that is 60:40Correct
  3. COnly preference holders vote because the resolution affects their shares
  4. DEquity holders have three times the voting power of preference holders

Explanation

The first proviso to Section 47(2) provides that the proportion of voting rights of equity to preference shareholders is the same as the proportion of paid-up equity capital to paid-up preference capital. Here that is 60:40, or 3:2, not 3:1. Equal power ignores paid-up capital, and equity holders also vote on every resolution.

Did you get it right without looking?

One question tells you little. A timed set on Share and Share Capital - Concepts shows your real accuracy, how long you take and where you lose marks.

Practise Share and Share Capital - ConceptsFree diagnostic mock

More Share and Share Capital - Concepts questions