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CMA Intermediate · Business Laws and Ethics · Rights of Shareholders

Under the Companies Act, 2013, a company limited by shares and holding preference share capital: on which resolutions may a preference shareholder ordinarily vote, in respect of that capital?

A preference shareholder can ordinarily vote only on resolutions that directly affect the rights attached to the preference shares, or on resolutions for winding up or for repayment or reduction of equity or preference share capital. Full voting arises only on prolonged dividend default.

  1. AOnly resolutions directly affecting the rights attached to the preference shares, or for winding up or for repayment or reduction of equity or preference share capitalCorrect
  2. BEvery resolution placed before the company, exactly like an equity shareholder
  3. COnly resolutions for appointment of directors
  4. DNo resolution at all, under any circumstances

Explanation

Section 47(2) restricts preference shareholders to resolutions directly affecting their preference rights, and resolutions for winding up or for repayment or reduction of equity or preference capital. Voting on every resolution arises only where the dividend on that class is unpaid for two years or more, which is an exception and not the ordinary position.

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