Variation of shareholder’s right [section 106]: there are two types of the shares in a company equity shares and/or preference shares. Different classes of shares possess different rights of a class of shares. The right of these shares is determined by the Memorandum, the Articles the terms of issue of shares or a special resolution. Subject to the fulfillment of the following condition, these rights may be varied:-
- A provision should be there in the Memorandum or the Articles of the company in respect of such variation
- A written consent should be given by the shareholders of at least ¾ th of the issued shares of the class whose right are to be varied or a special resolution must be passed at a separate meeting of the holders in that effect.
- If there are no such provisions in the Memorandum or Articles, such variation must not be prohibited by the terms of issue of the shares of that class.
Rights of dissentient shareholder: Following are the right of the dissentient shareholders:-
- The holder of not less than ten percent of the issued shares of a class who did not give their consent or have not voted in the favour of the resolution for the variations have the right to apply to the court to have the variation cancelled.
- Application to the court should be made within 21 days after the date on which the consent was given or the resolution was passed.
- The court grants a hearing to the application and to any other person who may apply to the court to be heard and appears to the court if interested in the application.
- If the court gets satisfied having regard to all the circumstances of the case, that the variation would unfairly prejudice the shareholders of the class represented by applicants, then the court disallows the variation and if the court does not get satisfied, it confirms the variation.
- On such application, the decision of the court is final.
- It is the duty of the company to forward a copy of order to the Registrar of Companies within 30 days.
- If the compliance of the provision is not followed then the company & every officer of the company who is in default shall be punishable with a fine which may extend to Rs. 50. [section 107]
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