## Voting Rights of Members – Section 47

### 1. Equity Shareholders

A member holding equity shares has the right to vote on every resolution placed before the company.
Voting rights are in proportion to paid-up equity capital held by him (except for shares with differential rights).

Nidhi Company exception: A member of a Nidhi cannot exercise more than 5% of the total voting rights of equity shareholders.

### 2. Preference Shareholders

A preference shareholder has voting rights in proportion to paid-up preference capital held by him only on resolutions that:

Directly affect rights attached to preference shares; or
Concern the winding up of the company; or
Concern the repayment / reduction of the equity or preference share capital.

### Enhanced Voting Right for Preference Holders

If dividend on a particular class of preference shares has not been paid for 2 or more years, those preference holders acquire the right to vote on all resolutions.

### Proportionality Rule

Where both equity and preference shareholders are entitled to vote on the same resolution, voting rights between the two groups are in the same proportion as their respective paid-up capital.

### Exemption

This section is not applicable to a private company if its MOA / AOA so provides.

Worked example

### Example 1

Example: Z Ltd. has paid-up equity capital of ₹50 lakh and paid-up preference capital of ₹25 lakh. A resolution for reduction of share capital is placed for vote (preference holders vote because the resolution directly affects them).

Solution: Voting rights are split in the ratio of paid-up capital — 50 : 25 = 2 : 1. So, if total voting weight is 75 units, equity holders collectively hold 50 votes and preference holders hold 25 votes.

⚠️ Common exam mistakes

Believing preference shareholders can vote on all resolutions by default — they can only do so on resolutions affecting their rights, or on winding up / reduction matters (unless dividend default ≥ 2 years).
Forgetting that the 2-year dividend default need not be consecutive — it can be cumulative arrears.
Overlooking the Nidhi 5% voting cap.
Missing the private-company exemption when MOA/AOA so provides.

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.

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Voting Rights of Members [Section 47]

Worked example

⚠️ Common exam mistakes