# Voting Rights of Members — Section 47

## A. Equity shareholders — Section 47(1)

Subject to Sections 43, 50(2) and 188(1):

(a) Every member holding equity share capital has a right to vote on every resolution placed before the company; and

(b) On a poll, voting rights are in proportion to the paid-up equity share capital held.

### Special rule — Nidhi Company

In a Nidhi company, no member can exercise voting rights on a poll in excess of 5% of total voting rights of equity shareholders (to prevent concentration in mutual-benefit companies).

## B. Preference shareholders — Section 47(2)

Every preference shareholder has a right to vote only on resolutions which:

(a) Directly affect the rights attached to his preference shares; AND

(b) Relate to the winding up of the company, or the repayment or reduction of equity/preference share capital.

### When preference shareholders get voting rights on ALL matters

If dividend on preference shares has not been paid for a period of two years or more, preference shareholders get the right to vote on every resolution placed before the company (proviso to Sec 47(2)).

## C. Equity shares with differential rights

Voting rights of DVR holders are governed by the terms of issue as specified in Articles/terms of issue — not necessarily by paid-up capital.

## Summary chart

```

VOTING RIGHTS

+----------------+----------------+

| |

Equity Shares Preference Shares

| |

+-----+-----+ +-------------+-------------+

| | | | |

Normal DVR Dividend Winding-up Resolutions

| (per unpaid for / capital directly

| terms) 2+ years reduction affecting

| => vote on preference

In proportion to every res. rights

paid-up equity

capital

```

## Sections referenced in 47(1)

Section 43 — Kinds of share capital
Section 50(2) — Calls in advance carry no voting rights
Section 188(1) — Related party transactions; interested member cannot vote

Worked example

### Example 1

Example 1 — Equity voting on poll

Mr. P holds 10,000 fully paid-up equity shares of ₹10 each in a company having total paid-up equity capital of ₹1 crore. What are his voting rights on a poll?

Answer: Mr. P's paid-up capital = ₹1,00,000. Total paid-up equity = ₹1,00,00,000. Voting rights = 1,00,000/1,00,00,000 = 1%.

### Example 2

Example 2 — Preference shareholder voting

XYZ Ltd has not paid dividend on its 9% preference shares for the FY 2023-24 and FY 2024-25. Can preference shareholders vote on a resolution to appoint an auditor?

Answer: Yes. Since dividend has not been paid for 2 consecutive years, preference shareholders acquire voting rights on every resolution, including auditor appointment.

### Example 3

Example 3 — Nidhi cap

In a Nidhi company, Mr. Q holds shares carrying 8% voting rights. On a poll, what voting power can he exercise?

Answer: Maximum 5% — regardless of his actual shareholding — owing to the Nidhi cap.

⚠️ Common exam mistakes

Believing preference shareholders never have voting rights — they have voting rights on matters directly affecting their rights, winding-up/reduction, and on ALL matters when dividend is in arrears for 2+ years.
Counting voting on a poll on the basis of number of shares rather than paid-up capital.
Ignoring the 5% cap on a member's voting rights in a Nidhi company.
Forgetting that calls in advance (Section 50(2)) carry no voting rights despite payment.
Assuming the 2-year arrear of dividend must be in consecutive years — the Act says 'a period of two years or more'.

Bare-Act text Section 47 · Companies Act, 2013 · click to expand

Section 47(1) — Subject to the provisions of section 43, sub-section (2) of section 50 and sub-section (1) of section 188, (a) every member of a company limited by shares and holding equity share capital therein, shall have a right to vote on every resolution placed before the company; and (b) his voting right on a poll shall be in proportion to his share in the paid-up equity share capital of the company. Section 47(2) — Every member of a company limited by shares and holding any preference share capital therein shall, in respect of such capital, have a right to vote only on resolutions placed before the company which directly affect the rights attached to his preference shares and, any resolution for the winding up of the company or for the repayment or reduction of its equity or preference share capital and his voting right on a poll shall be in proportion to his share in the paid-up preference share capital of the company. Provided that the proportion of the voting rights of equity shareholders to the voting rights of the preference shareholders shall be in the same proportion as the paid-up capital in respect of the equity shares bears to the paid-up capital in respect of the preference shares. Provided further that where the dividend in respect of a class of preference shares has not been paid for a period of two years or more, such class of preference shareholders shall have a right to vote on all the resolutions placed before the company.

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Voting Rights — Section 47

Worked example

⚠️ Common exam mistakes