Section 48 of CA 2013 : Section 48: Variation Of Shareholders? Rights

Explanation using Example

Imagine XYZ Pvt. Ltd. has two classes of shares: Class A and Class B. Class A shares come with voting rights, while Class B shares have higher dividend rights but no voting rights. The company decides to alter the dividend rights of Class B shareholders due to a change in company strategy.

To do so, XYZ Pvt. Ltd. needs to get the consent of at least 75% of Class B shareholders or pass a special resolution in a separate meeting of Class B shareholders. They manage to get this consent and the rights are varied accordingly.

However, a group of Class B shareholders who own 12% of the issued Class B shares do not agree with this change. They believe it unfairly affects their investment. Since they exceed the 10% threshold, they can apply to the Tribunal to challenge this variation within 21 days of the resolution.

The Tribunal hears the case and decides in favor of the company. The dissenting shareholders must abide by this decision as it is binding. XYZ Pvt. Ltd. then files a copy of the Tribunal’s order with the Registrar within 30 days to complete the process.