Can majority stake holder[51%] dilute share of [49%] without consent

734 votes

Hi

The Companies Act, 1956, provides that matters before the shareholders may be approved by a simple majority vote - more than 50% vote - or a special majority vote - at least 75% vote. For example, declaration of dividend requires only a simple majority vote, while a change of company's name requires a special majority vote.

In a 50:50 joint venture, reserved matters are 'generally' not provided. This is because a partner cannot pass a resolution with his 50% vote - he will need the vote of the other partner. To that extent, both partners are sufficiently protected.

However, the situation in a 51:49 venture is different. A 51% partner is in a position to pass all matters that require a simple majority. The consent of the 49% partner is required only for matter requiring special majority. In a 76:24 venture, the situation is such that the majority partner is in a position to get all matters passed without the consent of the minor partner, irrespective of whether they require simple or special majority.

Advocate Jai Patil LawRato

528 votes

Have you also gone through the articles of the Company? It will be important to see how the articles have dealt with the same.

Usually Companies need to offer its securities to its existing equity shareholders in the proportion of their shareholding in the company. It is required that the companies issuing further shares send notice along with offer letter to its equity shareholders.

Advocate Aparna Nair LawRato