13 August 2014
Hi friends i have a query- As per the provision of Section 48 a particular class of shareholders can vary the rights with the consent of 3/4th members in writing or through Special Resolution passed in the meeting.
However as per Rule 4(3) of Equity shares with differential rights, the company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and vice versa.
My question is that doesnt the two statements contradict as section 48 says any right can be varied and rule 4(3) says that differential voting rights cant be varied
23 July 2025
That's a great and very nuanced question. Let's clarify the apparent contradiction between **Section 48 of the Companies Act, 2013** and **Rule 4(3) of the Companies (Share Capital and Debentures) Rules, 2014**.
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## 📘 **Section 48 – Variation of Shareholder Rights**
Section 48 allows a company to **vary the rights attached to a particular class of shares** (including equity shares), but **only** with:
1. **Consent in writing of holders of not less than three-fourths** of the issued shares of that class, **or** 2. **Special resolution passed** at a separate meeting of that class of shareholders.
So, **variation of rights is generally permitted**, subject to consent.
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## 📕 **Rule 4(3) – Differential Voting Rights (DVR)**
Rule 4(3) of the **Companies (Share Capital and Debentures) Rules, 2014** clearly states:
> *“The company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and vice versa.”*
This is a **specific prohibition** on **converting standard equity shares into DVR shares (and vice versa).**
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## ⚖️ **Do They Contradict?**
**Not exactly. Here's why:**
* **Section 48 is a general provision** regarding variation of class rights. * **Rule 4(3) is a specific rule** under delegated legislation that **restricts one specific kind of variation** — i.e., **conversion** between ordinary equity and DVR equity.
Under legal interpretation principles (**generalia specialibus non derogant**), **specific rules override general provisions** when there’s a conflict.
So:
> ✅ **You may vary most rights under Section 48 with shareholder approval**, **but** > ❌ **You cannot use Section 48 to bypass the specific prohibition under Rule 4(3)**.
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## ✅ **Conclusion**
There is **no contradiction**, but rather a **legal hierarchy and specificity**:
* **Section 48** provides a general framework for varying rights. * **Rule 4(3)** carves out an **explicit exception** — restricting **conversion between DVR and regular equity shares**, even **with shareholder consent**.
📌 **Bottom line**: You cannot use Section 48 to convert voting equity into DVR shares or vice versa — Rule 4(3) prohibits it outright.
Let me know if you'd like the latest judicial interpretation or MCA circulars on this!
CAclubindia
