Preference shares

Voting rights of preference shareholders :

The preference shareholders do not enjoy normal voting rights like the equity shareholders. They are, however, entitled to vote in the following two cases.

(a) When any resolution directly affecting their rights is to be passed. It is worth noting here that any resolution for winding up of the company or for the repayment or reduction of its share capital is to be regarded as a resolution directly affecting the rights of the pre­ference shareholders and therefore they are entitled to vote on such a resolution.

(b) When the dividend due (whether declared or not) on their pre­ference shares or part thereof has remained unpaid: (i) in the case of cumulative preference shares, for an aggregate period of not less than two years preceding the date of the meeting; and (ii) in the case of non-cumulative preference shares, either for a period of two consecu­tive years or for an aggregate period of not less than three years com­prised in the six years ending with the expiry of the financial year immediately preceding the dale of the meeting.

It may be observed that when the dividend due on their preference shares has remained unpaid for periods specified above, the preference shareholders are entitled to vote on every resolution placed before the company at any general meeting.

The Act further provides that where a preference shareholder has a right to vote on any resolution in accordance with the provisions mentioned above, his voting right on a 'poll' shall be in the same pro­portion as the capital paid up in respect of preference shares bears to the total paid up equity capital of the company [Sec. 87 (2)].

It is important to note that the above provisions relating to voting rights of preference shareholders do not apply to an independent private company. Such a company can issue preference shares carry­ing normal voting rights or even disproportionate voting rights [Sec. 90 (2)].

therfore i think u cannt issue preference shares with voting rights.

But as per my thinking an Independent Private Company can issue preference shares with voting rights bcoz sections 85 to 89 are not applicable on a Private Ltd Company until or unless it is a subsidiary of a public company.  Am i right?