Shareholder Rights - Majority Rule & Minority Rights, Company Law | Company Law - B Com PDF Download

Changes to MOA or AOA​

Memorandum of Association or Articles of Association of a Company can be amended only in a general meeting of the company, which can be convened by providing sufficient notice to the shareholders of the company. All shareholders have a right to vote on amendments relating to changes to MOA or AOA. An affirmative vote of not less than 75% of shareholders is required for some amendments that require special majority.

Convene General Meeting

The Board of Directors of a company is required to convene an extra ordinary general meeting (EGM) if a request to convent a EGM is received from shareholders holding not less than 10% of the paid-up capital of the company. The board is required to call for the EGM within 21 days of the date of request by shareholders on a date not less than 45 days from date of request for EGM. In case the Board of Directors fail to call for a EGM within the time provided, then the shareholders can themselves call for a EGM.

Attend and Vote At General Meeting

All companies are required to hold an annual general meeting every year, with no more than 15 months elapsing between two annual general meetings. All shareholders of a company have a right to receive a notice convening annual general meetings and extraordinary general meetings and to vote at such meetings for or against each of the resolutions proposed to be passed at such meetings.

Transfer Shares

Shareholders of a company have the right to transfer shares held by them in the company freely, except that, the board may refuse to register a transfer of shares if they are not fully paid or where the transferee is not a person approved by the board. A private limited company, however may, by its articles of association, restrict the transfer of shares and provide preemptive rights to its members for purchasing shares proposed to be transferred by the transferee.

Receive Dividends

Dividends can be paid by a company for any financial year out of the profits of the company for that year arrived at after providing for depreciation or out of the profits of the company for any previous financial year or years arrived at after providing for depreciation and remaining undistributed, or out of both. The declaration of dividends is subject to shareholders approval at an annual general meeting. Once dividends are announced, it must be paid within 30 days and any unpaid dividends must be transferred to a special dividend account opened by the company in a scheduled bank.

Minority Shareholders Protection

In case of oppression or mismanagement of the affairs of the company by majority shareholders, minority shareholders enjoy protection and right to relief from oppression. If 100 or more shareholders, or a number representing not less than 10% of the total number of shareholders, can apply to the Company Law Board if they are of the view that the affairs of the company are being conduced in a manner prejudicial to the public interest or company’s interest or in a manner oppressive to any shareholder. If found fit, the Company Law Board can pass any order it deems fit, including directing majority shareholders to buyout shared held by the oppressed minority.