The department of company affairs (DCA) is preparing a cabinet note which proposes to block conversion of preference shares into ordinary shares with voting rights in companies governed by sectoral caps.
At present, section 87 of the Companies Act, 1956 grants voting rights to preference shareholders if the company does not pay dividends on cumulative preference shares for two years and on non-cumulative preference shares for three years.
The DCA proposal, if approved by the cabinet, will scuttle the move by preference shareholders to gain voting rights and thereby a say in the management of companies. If the loophole is indeed plugged by amending the relevant section in the Companies Act, it would put to rest CDC Financial Services