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CS Professional · Corporate Restructuring, Valuation and Insolvency · Acquisition of Company or Business

Target Co Ltd is a company limited by shares. Its articles authorise acceptance of unpaid share capital. Shareholder Mr Iyer pays Rs 5 lakh toward uncalled money on his shares before any call is made. Under the Act, what is his voting position on that Rs 5 lakh?

Mr Iyer has no voting rights in respect of the Rs 5 lakh paid in advance until that amount has been called up. The company may accept such payment if its articles authorise it, but advance payment does not itself add voting power.

  1. AHe gets voting rights on it immediately
  2. BHe gets no voting rights on it until that amount has been called upCorrect
  3. CHe gets voting rights only if the board consents
  4. DHe gets voting rights only on a poll

Explanation

Section 50 lets a company, if authorised by its articles, accept the unpaid amount even if not called. Section 50(2) states the member has no voting rights in respect of the amount so paid until it is called up. So paying in advance does not buy extra control.

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