Higher Dividend Mandatory For Non-Voting Shares

According to the new bill, companies will be permitted to issue, by a special resolution, a maximum of 25 per of the voting equity as non-voting shares.

It will be mandatory for non-voting shares to carry a higher dividend as compared to the voting equity. However, a company and its shareholders will have the freedom to decide on the difference between the dividend on voting shares and that on the non-voting lot. To safeguard against potential abuse, the bill forbids the conversion of non-voting shares into voting equity.

The bill does not specify the eligibility conditions for companies which can issue non-voting shares. These will be spelt out subsequently in the guidelines for the issue of such shares, which will be notified by the Centre from time to time, sources said.

 

The government moved six other amendments to the Companies Act, 1956, three of which relate to pronouncements by finance minister P Chidambaram as part of the Union budget for the current year.

These provisions relate to removal of the Rs 1,000 ceiling on the claims of an employee if a company goes into liquidation, grant of voting rights to mutual funds, venture funds and other Sebi-recognised funds and debarring corporate defaulters from raising fresh deposits from investors and other companies in the intercorporate market.

The government has also moved three additional amendments, which fall outside the budget pronouncements. These relate to permitting companies to file documents with the registrar of companies in a computerised format, the issue of redeemable preference shares up to a maximum of 20 years (as against a 10-year tenure at present) and allowing companies to change their objects clause without having to take the Company Law Board clearance.

The Companies Bill, 1993, containing nearly 100 amendments, was moved in the Rajya Sabha three years ago to bring the Companies Act, 1956, in line with the liberalisation of the economy.

The glitches in the new bill became evident during the debate, leading to the decision to recodify it. The department of company affairs had nearly completed the recodification work when the Gowda government decided to redo the entire Act.