Govt Nixes Voting Rights Plan For Preference Shareholders

The government has decided against voting rights for preference shareholders to prevent a breach in the foreign direct investment limit. It has further decided to amend the Companies Act, 1956, to enable payment of dividends out of investments or reserves in case of long gestation projects such as telecom.

The decisions were taken at a meeting between finance minister Yashwant Sinha and law minister Arun Jaitley. Official sources told Business Standard that the law ministry had proposed to amend section 208 of the Companies Act to enable companies which have a long gestation period to pay dividends to preference shareholders. They added that the list of sectors would be prepared shortly.

 

The decision means that companies would be able to pay dividends without a breach of the sectoral foreign investment limit in sectors such as telecom, where FDI is capped at 49 per cent.