Shareholding pattern www.taxpertpro.com

1. TAXPERT PROFESSIONALS
ARTICLE
ON
Shareholding Rights
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The documents purports to provides the rights available to shareholders at various shareholding
percentages.

2. 10% SHAREHOLDING: Although the companies Act provide for very less powers to minority
shareholders and assume that the manner in which the affairs of the company should be conducted is
best decided by majority shareholders. However following points are pertinent to see in this respect.
• The 10% of the shareholder [1/10th of the paid up capital of the company] can requisition to the
Board of Director to call Extra Ordinary General Meeting [EGM] of the company.
Such requisition to call EGM has to be made by the members of the company to Board of
Directors. The requisition shall set out the matters for the consideration of which the meeting to
be called, shall be signed by members and shall be deposited at the registered office of the
company.
Two members personally present make the quorum of the meeting. For passing the resolution
at the meeting [ordinary and special] the members voting are counted for the purpose of
counting the number of votes. That means that two members having only 10% of shareholding
present in EGM can pass the valid and binding resolution to execute any matter. Therefore it is
necessary that while drafting the Article of Association appropriate guards are taken in
relation to quorum of general meeting.
For example: In a private company having 5 shareholders out of which 10% of the paid up
capital is held together by Mr. X and Mr. Y. If X and Y manage to get the EGM called and both
vote in favor of resolution [assuming other shareholders to be absent in meeting] then they can
effectively execute all the things which even require 51% or 75% of approval. Therefore as
mentioned above it is very necessary that while drafting the Article of Association appropriate
safeguard is taken in relation to quorum of general meeting so that the powers are exercised in
the manner desired by majority shareholders.
• Oppression and Mismanagement
In case of oppression and mismanagement of the company the members having not less than
one tenth of the total number of the company may apply to the Company Law Board. The
circumstances under which it will be considered that the affairs of the company are managed in
the manner which is considered as oppression and mismanagement are mentioned in section
397 http://www.vakilno1.com/bareacts/companiesact/s397.htm and Section 398
http://www.vakilno1.com/bareacts/companiesact/s398.htm of the companies Act, 1956.
51% SHAREHOLDING: All the acts where the company is required to do some act in general meeting it
means that an ordinary resolution is required to be passed. Ordinary resolution means a resolution
which requires simple majority of the members which being present and entitled to vote upon a
resolution do vote.
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3. For example: - The approval of a minimum of 50% of the shareholders is required for for alteration of
the share capital; declaration of dividend; election, removal, and remuneration of directors; approval of
annual accounts; appointment of auditors of company, appointment of other officers and other routine
matters relating to the conduct of a company as may be decided by Article of the company. Following
act of Company can only be done in General Meeting:
(a) Sell, lease or otherwise dispose of undertaking of the company;
(b) Remit, or give time for the repayment of, any debt due by a director;
(c) invest, otherwise than in trust securities, the amount of compensation received by the company in
respect of the compulsory acquisition;
(d) borrow moneys where the moneys to be borrowed, together with the moneys already borrowed by
the company will exceed the aggregate of the paid-up capital of the company and its free reserves;
(e) contribute to charitable and other funds not directly relating to the business of the company or the
welfare of its employees, any amounts the aggregate of which will, in any financial year, exceeding the
prescribed amount.
75% SHAREHOLDING: Following is the list of things which can be done only with 75% of the
shareholding [in case of 100% of voting]. At least 75% of the shareholders must approve a matter. In
other words, minority shareholder with more than 25% voting rights would have the ability to block in
these matters.
Following is the illustrative list of where the matter can be conducted only subject to special resolution
by the company
• To alter the provisions of the memorandum, with respect to the place of registered office of a
company from one state to another or its objects and change of registered office within a state
but to the jurisdiction of another registrar.
• To change the name of the company,
• To alter the articles of association of a company.
• To buyback own shares except where it is of less than 10% of its paid-up capital and free
reserves and is authorised by a Board resolution.
• Issue of Bonus shares.
• To offer further shares to any person (whether or not those persons include members).
• To approve the term providing for an option to convert the debentures or loans into shares
• To determine that any portion of the share capital shall not be called up except in the event of
winding up.
• To reduce the share capital.
• Alteration of rights of holders of special classes of shares.
• To remove the registered office of a company outside the local limits of the city, town or village
in which it is situated.
• To commence any business specified in ‘other objects’ by public company.
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4. • To keep registers, indexes, returns, copies of certificates and documents required to be annexed
thereto at any other place within the city, town or village in which the registered office is
situated.
• To pay interest out of capital if not authorised by the articles.
• Appointment of sole selling agents by a company whose paid-up capital is Rs. 50 lakhs or more.
• To determine the remuneration payable to a director, if the articles so require in the case of a
public company or its subsidiary
• To have the affairs of a company investigated by inspectors appointed by the Central
Government.
• To authorise remuneration to a director who is neither in the wholetime employment of the
company nor a Managing Director by way of commission.
• For a director holding an office or place of profit or his specified associate holding an office or a
place of profit carrying monthly remuneration of prescribed amount.
• For a director’s or manager’s relative, private companies etc. specified in the section to hold
office or place of profit under the company at a monthly remuneration of prescribed amount.
• To give loans or guarantees to other companies or make investment in shares of other
companies.
• To get the company wound up by the Tribunal.
• To have the company wound up voluntarily.
• For the arrangement between the co. and its creditors so as to bind the company and its
members.
• Appointment of a person as a Managing / Whole-time Director /Manager if such person is below
25 years but attained majority or is above 70 years in age.
• For paying remuneration in relation to companies having no profits as referred to in part 2 of
Schedule XIII of Companies Act.
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