Companies Act Section 48 — Variations of shareholders’ rights
CHAPTER IV SHARE CAPITAL AND DEBENTURES
Commercial / Corporate
Summary
Sub-section (1) explains that when a company's share capital is divided into different classes of shares, the rights attached to any class can be changed. This change requires either the written consent of at least three-fourths of the holders of the issued shares of that class, or a special resolution passed at a separate meeting of those shareholders. This can be done if the company's memorandum or articles already contain a provision allowing such a variation, or if there is no such provision, as long as the variation is not prohibited by the terms under which those shares were issued.
The proviso to sub-section (1) adds that if a variation affecting one class of shareholders also impacts the rights of another class, then the consent of three-fourths of the shareholders of that other class must also be obtained, and the same rules apply to that variation.
Sub-section (2) states that if holders of at least ten percent of the issued shares of a class did not consent to the variation or did not vote in favour of the special resolution, they can apply to the Tribunal to have the variation cancelled. If such an application is made, the variation will not take effect unless and until the Tribunal confirms it. The proviso to this sub-section specifies that the application must be made within twenty-one days after the date the consent was given or the resolution was passed, and it can be filed on behalf of the eligible shareholders by one or more of them who are appointed in writing for that purpose.
Sub-section (3) provides that the decision of the Tribunal on any application made under sub-section (2) is binding on all the shareholders.
Sub-section (4) requires the company to file a copy of the Tribunal's order with the Registrar within thirty days of the date of that order.
Official Text
(1) Where a share capital of the company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or by means of a special resolution passed at a separate meeting of the holders of the issued shares of that class,—
(a) if provision with respect to such variation is contained in the memorandum or articles of the company; or
(b) in the absence of any such provision in the memorandum or articles, if such variation is not prohibited by the terms of issue of the shares of that class:
Provided that if variation by one class of shareholders affects the rights of any other class of shareholders, the consent of three-fourths of such other class of shareholders shall also be obtained and the provisions of this section shall apply to such variation.
(2) Where the holders of not less than ten per cent. of the issued shares of a class did not consent to such variation or vote in favour of the special resolution for the variation, they may apply to the Tribunal to have the variation cancelled, and where any such application is made, the variation shall not have effect unless and until it is confirmed by the Tribunal:
Provided that an application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed, as the case maybe, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(3) The decision of the Tribunal on any application under sub-section (2) shall be binding on the shareholders.
(4) The company shall, within thirty days of the date of the order of the Tribunal, file a copy thereof with the Registrar. 1* * * * *