Section 4(1) in Companies (Share Capital and Debentures) Rules, 2014
(1)No company limited by shares shall issue equity shares with differential rights as to dividend, voting or otherwise, unless it complies with the following conditions, namely:-(a)the articles of association of the company authorises the issue of shares with differential rights;(b)the issue of shares is authorised by an ordinary resolution passed at a general meeting of the shareholders:Provided that where the equity shares of a company are listed on a recognized stock exchange, the issue of such shares shall be approved by the shareholders through postal ballot ;(c)[ the voting power in respect of shares with differential rights of the company shall not exceed seventy four per cent. of total voting power including voting power in respect of equity shares with differential rights issued at any point of time;] [Substituted by Notification No. G.S.R. 574(E), dated 16.8.2019 (w.e.f. 31.3.2014).][***] [Omitted 'clause (d)' by Notification No. G.S.R. 574(E), dated 16.8.2019 (w.e.f. 31.3.2014).](e)the company has not defaulted in filing financial statements and annual returns for three financial years immediately preceding the financial year in which it is decided to issue such shares;(f)the company has no subsisting default in the payment of a declared dividend to its shareholders or repayment of its matured deposits or redemption of its preference shares or debentures that have become due for redemption or payment of interest on such deposits or debentures or payment of dividend;(g)the company has not defaulted in payment of the dividend on preference shares or repayment of any term loan from a public financial institution or State level financial institution or scheduled Bank that has become repayable or interest payable thereon or dues with respect to statutory payments relating to its employees to any authority or default in crediting the amount in Investor Education and Protection Fund to the Central Government;[Provided that a company may issue equity shares with differential rights upon expiry of five years from the end of the financial year in which such default was made good.] [Inserted by Notification No. G.S.R. 704 (E), dated 19.7.2016 (w.e.f. 31.3.2014).](h)the company has not been penalized by Court or Tribunal during the last three years of any offense under the Reserve Bank of India Act, 1934, the Securities and Exchange Board of India Act, 1992, the Securities Contracts Regulation Act, 1956, the Foreign Exchange Management Act, 1999 or any other special Act, under which such companies being regulated by sectoral regulators.
