Chapter IV - Share Capital and Debentures
Section 48
Section 48: variation of class rights
Class rights can be varied with written consent of holders of at least three-fourths of the issued shares of the class, or by a special resolution at a separate class meeting, if the constitution or terms of issue allow.
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This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Where a share capital of the company is divided into different classes of shares, the rights attached to the shares of any class may be varied with the consent in writing of the holders of not less than three-fourths of the issued shares of that class or by means of a special resolution passed at a separate meeting of the holders of the issued shares of that class,— (a) if provision with respect to such variation is contained in the memorandum or articles of the company; or (b) in the absence of any such provision in the memorandum or articles, if such variation is not prohibited by the terms of issue of the shares of that class: Provided that if variation by one class of shareholders affects the rights of any other class of shareholders, the consent of three-fourths of such other class of shareholders shall also be obtained and the provisions of this section shall apply to such variation. (2) Where the holders of not less than ten per cent. of the issued shares of a class did not consent to such variation or vote in favour of the special resolution for the variation, they may apply to the Tribunal to have the variation cancelled, and where any such application is made, the variation shall not have effect unless and until it is confirmed by the Tribunal: Provided that an application under this section shall be made within twenty-one days after the date on which the consent was given or the resolution was passed, as the case may be, and may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose. (3) The decision of the Tribunal on any application under sub-section (2) shall be binding on the shareholders. (4) The company shall, within thirty days of the date of the order of the Tribunal, file a copy thereof with the Registrar.
Introduction
Section 48 protects each class of shareholders where share capital is divided into classes. Variation needs class approval and a basis in the memorandum or articles or, if they are silent, the absence of a prohibition in the terms of issue.
Dissenting holders of at least ten per cent of the issued shares of the class can apply to the Tribunal within twenty-one days. The variation then has no effect unless the Tribunal confirms it.
Key takeaways
Class approval
Written consent of at least three-fourths of the issued shares of the class, or a special resolution at a separate class meeting.
Other affected classes
If the variation affects another class, three-fourths of that class must also consent.
Dissenters’ remedy
Holders of ten per cent or more who did not consent may apply to the Tribunal within twenty-one days.
Confirm the basis for variation
Check whether the memorandum or articles contain a provision for varying class rights. If they do not, check that the terms of issue of the class do not prohibit the variation.
Obtain class approval
Obtain written consent from holders of not less than three-fourths of the issued shares of the class, or pass a special resolution at a separate meeting of the holders of the issued shares of that class. If the variation affects another class, also obtain the consent of three-fourths of that other class.
Track the dissenters’ window
Holders of not less than ten per cent of the issued shares of the class who did not consent or vote in favour may apply to the Tribunal to cancel the variation. The application must be made within twenty-one days after the consent was given or the resolution passed. One or more of them may apply on behalf of all, if appointed in writing. Once an application is made, the variation has no effect unless and until the Tribunal confirms it.
File the Tribunal order
The Tribunal’s decision binds the shareholders. The company must file a copy of the Tribunal’s order with the Registrar within thirty days of the date of the order. Section 2(90) defines the Tribunal as the National Company Law Tribunal constituted under section 408.
Practical preparation
Identify the class and every other class affected; check the constitution and terms of issue; obtain three-fourths consents or a class special resolution; diarise the twenty-one-day window; file any Tribunal order within thirty days.
Commencement and amendment record
Section 48 came into force on 15 December 2016 under S.O. 3677(E) dated 7 December 2016. Section 8 of the Companies (Amendment) Act, 2020 omitted sub-section (5), which had prescribed fines and imprisonment for default. Under S.O. 4646(E), that omission took effect on 21 December 2020. The current section has no specific penalty clause. Check whether a general penalty provision of the Act applies to a default.
Practical checklist
Do
- Identify every class whose rights the proposal touches.
- Wait out the twenty-one-day window before treating the variation as settled.
Avoid
- Do not rely on a general-meeting resolution alone to vary class rights.
- Do not implement a variation under challenge before Tribunal confirmation.
Illustrative example
Hypothetical: changing a dividend preference
A company proposes to reduce the fixed dividend rate on a preference class. Its articles permit variation.
Approve
Obtain written consent of three-fourths of the issued preference shares of that class.
Other classes
Check whether any other class is affected and, if so, obtain its three-fourths consent.
Window
Allow twenty-one days for any application by ten per cent dissenters.
Outcome
- If no application is made, the variation stands on the class approval. If one is made, it waits for Tribunal confirmation.
Glossary
- Class rights
- Rights attached to the shares of a particular class where share capital is divided into classes.
- Separate class meeting
- A meeting of the holders of the issued shares of one class only, at which a special resolution can approve a variation.
Frequently asked questions
What approval is needed to vary class rights?
Written consent of holders of at least three-fourths of the issued shares of the class, or a special resolution at a separate meeting of that class.
Who can challenge a variation?
Holders of at least ten per cent of the issued shares of the class who did not consent or vote in favour, by applying to the Tribunal within twenty-one days.
Is there still a penalty in section 48?
The specific penalty in sub-section (5) was omitted with effect from 21 December 2020.
Need help applying this provision to your situation?
Contact BizeneedLast updated 11 October 2026