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Originally posted by :Bhushan Sheth |
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Dear Sir,
My family owned around 23% of a Private Limited company A. After merging company A with another smaller company B, our shareholding got reduced to 19% - without our permission. Subsequently, the majority shareholder family (owning around 66%) of the company issued new shares again WITHOUT offering us and doubled the equity share capital of the company and this automatically reduced our shareholding % to half and now stands at 9.5% approx.
1) Is this a punishable offence under the Company Law of India ?
2) What are the legal steps we can take to protect our shareholding % and take it back to the original 23% or atleast 19% ?
3) If the Articles of Association allows the majority shareholder to subscribe to shares without offering other shareholders, can the Indian Company Law for Corporate Governance supercede this ?
Any information you can offer on the above will be greatly appreciated.
Regards,
Bhushan Sheth |
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Dear Bhushan Sheth !
1. Under Companies Act, the law of Sec 81 Futher Issue of Capital doesn't apply to Private companies. So there is no need to offer the new share to existing shareholders first. Private company is not bound to offer shares to existing shareholders.
2. In the above view, the company didn't commit any default on part of complying provisions of companies act.
3. However if u are also the director of the company & u didn't receive the notice of board meeting in which the those new shares were alloted, then that meetings proceeding will become void. & that share allotment will not be effective.
4. You have one remedy against this, but in my opinion we cannot stop the company from alloting shares to any people to whom the board of directors want. U can consult to any practicing CS or CA & can file petition to CLB for this. I am not sure about the section number under which you can file this petition.
