Procedure for Variation of Members Rights

Procedure-for-Variation-of-Members-Rights

Procedure for Variation of Members Rights


 
  1.  Check the Memorandum and Articles of Association of the company, whether any of them authorizes the company to vary the rights attached to any class of shares and such rights of the company are not prohibited by either of them and also by the terms of issue of that class of shares. If not, then, alter the Articles of Association of the company to that effect.

    2.  Convene a Board Meeting after giving notice to all the directors of the company as per Section 173 of the Act and in the case of a listed company, also to the stock exchanges for consideration of the variation of the rights of the holders of issued shares of a particular class. Decide the way to adopt for variations, either through:

3.  obtaining written consent of the holders of not less than three-fourths of the issued shares of that class; or

4.   convening a separate meeting of the holders of the issued shares of that class for passing a special resolution thereat.

5.      If the Board approves the first method as mentioned 2(a) above, then:

– approve the resolution for circulation among the holders of the issued shares of that class, and

– circulate such resolution amongst the holders and obtain their approval in writing of at least three-fourths of the issued shares of that class.

6.    If the Board approves the second method as mentioned in 2(b) above, or the company fails to obtain written approval from the holders of not less than three-fourths of the issued shares of that class then —

– authorize the company secretary to convene a separate meeting of the holders of the issued shares of that class; and

– approve the notice of such meeting containing special resolution with an explanatory statement relating thereto and a proxy form.

7.    Give twenty one days’ prior notice of the meeting to the holders of shares of that class and also send three copies of the notice to the stock exchanges where such shares are listed in accordance with the listing agreement.
8.    Hold the separate meeting of the holders of issued shares of that class and pass special resolution so proposed by three-fourths majority of the holders present.

9.  A copy of the proceedings of the general meeting should also be sent to the stock exchange.

10. In both the cases, file Form No. MGT. 14 with certified copy of the resolution so approved or certified copy of the special resolution and explanatory statement within thirty days from the date of approval or the date of passing special resolution, as the case may be, together with requisite filing fees with the concerned Registrar of Companies.

11. Ensure that the said e-form is filed electronically and copy of the special resolution and explanatory statements are filed with the said e-form as attachments.

11. Ensure that the said e-form is digitally signed by the managing director or director or manager or secretary of the company duly authorized by the Board of directors.

12. Further ensure that the said e-form is certified by a chartered accountant or a cost accountant or a company secretary in whole-time practice by digitally signing the said e-form.

13. If the company is a listed company, then ensure that the aforesaid special resolution is passed only through postal ballot.

14. Inform the stock exchange where the shares of that class are listed about the variation in the members’ rights thereof.

15. If variation affects the rights of the holders of other class of shares, simultaneously obtain consent or approval from them.

16. On variation becoming effective, make necessary changes in all the papers, documents, registers etc.
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