Launch offer — 25% off with code LAUNCH-25 See plans →
Microlesson · 5-min read

Restriction on Voting Rights (Section 106)

# Restriction on Voting Rights [Section 106]

A member's right to vote is fundamental — but it is not absolute. Section 106 permits the Articles to impose limited restrictions, and only those expressly enumerated.

## Permitted Restrictions (Section 106(1))

Articles may disenfranchise a member in respect of any share where:

1. Calls or other sums presently payable to the company on that share have not been paid, OR

2. The company has exercised a right of lien over that share.

## Forbidden Restrictions (Section 106(2))

A company cannot prohibit voting on any other ground apart from the two above.

Implication: If Articles are silent, no restriction operates — the member can vote even if calls are unpaid or lien is exercised.

## Splitting / Partial Voting (Section 106(3))

On a poll, a member with more than one vote (or his proxy):

  • Need NOT use all his votes;
  • Need NOT cast all the votes he does use in the same way.

(Free to split votes for/against a resolution.)

## Other Consequences of Voting Restriction

A disqualified member also cannot sign a requisition for an EGM under Section 100.

## Joint Shareholders (Regulation 52, Table F)

Where shares are jointly held:

  • The joint holders must concur in voting (unless Articles say otherwise).
  • If they vote separately, the senior holder's vote prevails to the exclusion of the others.
  • Seniority = order in which names appear in the register of members.

## Re-Allotment of Forfeited Shares — Important Nuance

If shares forfeited for non-payment of calls are re-allotted to a new allottee:

  • The new allottee may be liable for the unpaid balance.
  • He is not entitled to vote so long as the unpaid calls remain unpaid (where Articles contain the standard restriction).

## Specified IFSC Public Company

Section 106 applies, unless otherwise specified in the company's Articles. Allows Articles to override the default.

Worked example

### Example 1

Q: ABC Ltd's articles say nothing about restricting voting rights of members with unpaid calls. Mr. M has not paid the second call on his 500 shares. Can the company prevent him from voting?

A: No. Section 106(2) bars restriction except on the two enumerated grounds, and even those require express provision in the Articles. Since ABC Ltd's articles are silent, Mr. M can vote in full.

### Example 2

Q: XYZ Ltd's articles disenfranchise members with unpaid calls. Forfeited shares are re-allotted to Mr. N, who has not yet paid the balance unpaid amount. Can he vote on those shares?

A: No. As a re-allottee, Mr. N is liable for the unpaid balance, and since calls 'presently payable' remain unpaid, he cannot vote on those shares so long as the dues remain.

### Example 3

Q: Shares are jointly held by Mr. A (1st named), Mrs. B (2nd named) and Mr. C (3rd named). At a meeting, Mr. A votes 'for' and Mr. C votes 'against' a resolution. Whose vote counts?

A: Mr. A's vote counts. Seniority is determined by order of names in the register. Mr. A (1st named) is senior; his vote is accepted to the exclusion of Mr. C's. Mrs. B is silent.

⚠️ Common exam mistakes

  • Assuming the company can disenfranchise a member simply because calls are unpaid — actually requires an express Articles provision.
  • Thinking the Section 106(1) restrictions are automatic — they are only enabling; the Articles must actually invoke them.
  • Listing grounds other than unpaid calls or lien as valid restrictions — Section 106(2) closes that door.
  • Forgetting that a re-allottee of forfeited shares can be disenfranchised until past dues are cleared.
  • Treating joint holders as one vote regardless of order — the senior (1st named) prevails in case of disagreement.
Bare-Act text Section 106 · Companies Act, 2013 · click to expand
Section 106 (1): The articles of a company may provide that no member shall exercise any voting right in respect of any share registered in his name on which any amount is due from him on calls or any other sums presently payable by him to the company have not been paid, or in regard to which the company has exercised any right of lien. Section 106 (2): A company shall not prohibit any member from exercising his voting rights on any other ground except the grounds mentioned as above.
Now that you've read this — what's next?
Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.
Start 15-min diagnostic