Becoming a shareholder in a company includes the right to share in the Company’s profitability, income, and assets. But many of the shareholders are unaware of their rights. These rights that all possess the influence over the company management selection, preemptive rights to newly issued shares, and general meeting voting rights. Here in this article, we will see the Variations in the Shareholder’s Rights and its procedure of Modification.
The Shareholders of a company are granted various rights and protections under the Companies Act, 2013.
Following are the rights which the Shareholders enjoy –
A general meeting is held for any changes in the amendments of the MOA or AOA of the Company. The Shareholders have the right to vote on amendments relating to any kind of changes in the MOA or AOA of the Company. Some amendments require a special majority in which a vote of not less than 75 percent of shareholders is required.
The Shareholders of the Company have the right to transfer shares to another shareholder in the Company, but the Board may refuse to register a transfer of shares if the shareholder transferring the Share is not approved by the Board. However, in a Private Limited Company, the transfer of shares is restricted by its AOA (Articles of Association).
The Dividends are paid to the shareholder from the profits of the Company. The declaration of the dividends is subject to shareholders’ approval at the Annual General Meeting. After the Dividend is announced at the General meeting, the Dividend must be paid within 30 days, and any unpaid dividends are transferred to the scheduled bank of the shareholder.
The companies hold an annual general meeting every year in which all the shareholders of the Company have the right to receive a notice convening about the annual general meeting and extraordinary general meetings. The shareholders also have the right to vote at such meetings for or against each of the resolutions passed at such meetings.
The Share Capital of a company is divided into different classes of shares, and it is necessary to amend the rights attached to one or more classes of Share. But according to the MOA or AOA of the Company, the authorization to make any changes in the Shareholder’s right is not possible until the consent of the shareholder in writing.
There are certain procedures which need to be followed for any variations in the shareholders right.
Every class of Share has specific rights mentioned in the Articles of Association or MOA of the Company. Any Kind of modification in the class rights must be approved by the shareholders in a meeting. Although in some cases, modification of class rights could be held without a class meeting.
Here we will see the modifications of class rights without holding a class meeting –
A Board meeting is held which will pay the following resolutions:
The Shareholders enjoy several rights in a company, but at times the Shareholders’ rights in a company vary for different classes of shares. It is necessary to amend the rights attached to one or more classes of Share, which requires certain procedures to follow and must be in accordance with the MOA or AOA of the Company.