An equity shareholder can vote on every resolution placed before the company.
Voting rights on a poll shall be in proportion to the paid-up equity share capital (PUESC) held.
### Special Exception — Nidhi Company
In a Nidhi Company, voting rights are restricted to a maximum of 5% of total voting rights of the equity shareholders, regardless of actual shareholding.
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## B. Preference Shareholders (PSH)
### Limited Voting Rights
A preference shareholder can vote only on the following resolutions:
1. Resolutions directly affecting their rights as preference shareholders.
2. Resolution for winding up of the company.
3. Resolution for repayment of equity share capital (ESC) or preference share capital (PSC).
### Proportion of Voting Rights
Voting rights on a poll shall be in proportion to paid-up preference share capital (PUPSC) held.
### Expanded Voting Rights — Dividend Default
Where dividend in respect of preference shares has not been paid for a period of 2 years or more, the preference shareholders gain the right to vote on every resolution placed before the company (just like equity shareholders).
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## Applicability
Section 47 is NOT applicable to a Private Company where the MOA / AOA so provides.
Worked example
### Example 1
Example: PQR Ltd has not declared preference dividend for 2 years and 3 months. A general meeting is to be held for amending the objects clause of the MOA. Can preference shareholders vote on this resolution?
Answer: Yes. Since preference dividend has not been paid for 2 years or more, preference shareholders are entitled to vote on every resolution, including amendment of the objects clause. Their voting right is in proportion to their PUPSC.
### Example 2
Example: A is an equity shareholder of XYZ Nidhi Ltd holding 12% of the total equity. What is his voting right percentage?
Answer: Although A holds 12% of equity, in a Nidhi company, voting rights are capped at 5% of the total voting rights. Hence A can exercise voting rights only up to 5%, even though he holds 12% equity.
### Example 3
Example: ABC Pvt Ltd's AOA states that Section 47 shall not apply. Can the company give equal voting rights to preference shareholders on all matters?
Answer: Yes. Section 47 does not apply to a private company whose MOA/AOA so provides. ABC Pvt Ltd can structure voting rights of preference shareholders differently from Section 47's default rule.
⚠️ Common exam mistakes
Thinking preference shareholders can vote on all resolutions — they can vote only on resolutions directly affecting their rights, winding up, or repayment of capital (unless dividend default of 2+ years).
Stating the dividend default period as 3 years — it is 2 years.
Forgetting the 5% voting cap applicable to Nidhi companies.
Mixing up PUESC and PUPSC — equity voting is in proportion to PUESC; preference voting is in proportion to PUPSC.
Forgetting that Section 47 does not apply to a private company whose articles so provide.
Believing preference shareholders gain full voting rights after just 1 year of default — minimum is 2 years.
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, 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 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. Provided 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.