Smart Ltd, a listed company, has a paid-up share capital of ₹50 crore divided into 50 Lakh equity shares of ₹100 each, carrying a voting right of one vote per share. The Company needs infusion of funds but the promoters

The case is related to issue of shares with differential rights. Rule 4 of the Companies (Share Capital and Debentures) Rules 2014 provides for the following conditions to be satisfied before issuing shares with differential rights: Issue of shares with differential rights should be authorized by the articles and by an ordinary resolution in the shareholders' meeting and by postal ballot in the case of a listed company. The issue shall not exceed 26% of the total post-issue paid up equity share capital including the equity shares with differential rights, at any point of time. The Company should have consistent track record of distributable profits for the last three years. 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 shares with differential rights. The Company has no subsisting default in payment of declared dividend to its shareholders or matured deposits or redemption of preference shares or debentures that have become due for redemption and the interest thereon. The Company has not defaulted in payment of dividend on preference shares or repayment of term loan from a public financial institution or state level financial institution or schedule bank that has become payable or interest thereon or dues with respect to statutory payments relating to employees or default in crediting the amount to IEPF; Provided that a company may issue equity shares with differential rights upon expiry of 5 years from the end of the financial year in which such default was made good. The Company has not been penalized by Court or Tribunal during the last 3 years of any offence under RBI Act, SEBI Act, Securities Contracts (Regulation) Act, FEMA Act or any other special Act under which such companies are being regulated by sectoral regulators. The Company cannot convert the existing equity shares into equity shares with differential rights and vice versa.