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

Which statement correctly reflects Section 43 on the permitted forms of equity share capital of a company limited by shares?

Equity share capital may carry voting rights, or differential rights as to dividend, voting or otherwise, but differential rights must be in accordance with the rules prescribed. Section 43 therefore permits both forms, subject to compliance with those rules.

  1. AEquity capital may only carry voting rights; differential rights are not permitted
  2. BEquity capital may carry voting rights or differential rights as to dividend, voting or otherwise, in accordance with prescribed rulesCorrect
  3. CEquity capital with differential rights may be issued freely without reference to any rules
  4. DEquity capital must always carry a fixed dividend rate

Explanation

Section 43(a) provides that equity share capital is either with voting rights or with differential rights as to dividend, voting or otherwise, in accordance with such rules as may be prescribed. So differential rights are allowed but only per the rules. Option three ignores that condition.

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