Swadha Ltd. is a well-established company which wants to issue equity shares with differential voting rights in the near future. In this regard, explain the related provisions/conditions of Companies (Share Capital and D

Answer 4(a) Swadha Ltd. is required to comply with the following conditions for issuing shares with differential rights [Rule 4 of the Companies (Share Capital and Debentures) Rules, 2014] No company limited by shares can issue equity shares with differential rights as to dividend, voting or otherwise. Such company has to comply with the following conditions, namely: Authorization in Articles of Association: The articles of association of the company authorizes the issue of shares with differential rights. Passing of Ordinary Resolution at General Meeting: The issue of shares is authorized by an ordinary resolution passed at a general meeting of the shareholders. Where the equity shares of a company are listed on a recognized stock exchange, the issue of such shares shall be approved by the shareholders through postal ballot. Limit for voting power not exceeding 74%: The voting power in respect of shares with differential rights of the company shall not exceed seventy four percent of total voting power including voting power in respect of equity shares with differential rights issued at any point of time. No defaults: The company has not defaulted in the following: the company has not defaulted in filing financial statements and annual returns for three financial years immediately preceding the financial year in which it is decided to issue such shares; the company has no subsisting default in the payment of a declared dividend to its shareholders or repayment of its matured deposits or redemption of its preference shares or debentures that have become due for redemption or payment of interest on such deposits or debentures or payment of dividend; the company has not defaulted in payment of the dividend on preference shares or repayment of any term loan from a public financial institution or State level financial institution or scheduled Bank that has become repayable or interest payable thereon or dues with respect to statutory payments relating to its employees to any authority or default in crediting the amount in Investor Education and Protection Fund to the Central Government. However, a company may issue equity shares with differential rights upon expiry of five years from the end financial year in which such default was made good. The company has not been penalized by Court or Tribunal during the last three years of any offence under the RBI Act, 1934, the SEBI Act, 1992, the Securities Contracts Regulation Act, 1956, the Foreign Exchange Management Act, 1999 or any other Special Act, under which such companies being regulated by sectoral regulators. The company shall not convert its existing equity share capital with voting rights into equity share capital carrying differential voting rights and vice versa. The Register of Members maintained under section 88 shall contain all the relevant particulars of the shares so issued along with details. The holders of the equity shares with differential rights enjoys all other rights such as bonus shares, rights shares etc., which the holders of equity shares are entitled to, subject to the differential rights with which such shares have been issued. In case Swadha Ltd. is a listed entity, additional requirements as per SEBI will also apply.