Section 48 of the Companies Act, 2013
Section 48 of the Companies Act, 2013 deals with the variation of shareholders' rights. Here's a summary of its key provisions:
Section 48 – Variation of Shareholders’ Rights
Variation of Rights:
If the share capital of a company is divided into different classes of shares (like equity and preference), the rights attached to any class can be varied:
With the consent in writing of the holders of at least three-fourths (¾) of the issued shares of that class, or
By a special resolution passed at a separate meeting of the holders of that class of shares.
Protection of Minority Shareholders:
If the holders of at least 10% of the issued shares of a class do not consent to the variation and disagree with it, they can apply to the Tribunal (National Company Law Tribunal - NCLT) to cancel the variation.
This application must be made within 21 days of the variation being passed.
Effectiveness of Variation:
The variation of rights will not take effect until the expiry of 21 days (if no objection) or until the Tribunal confirms it (if an objection is raised).
Applicability:
The provisions apply whether or not the company is being wound up.
Objective of Section 48:
To ensure that the rights of minority shareholders of a particular class are not adversely affected by decisions of the majority without a proper remedy.
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