Veto Powers

Company Secretary

Dear All,

Hi!

Can anyone ls. defne veto powers under Companies Act, 1956. As far as I know that it represents 26% shareholding in a Company.  Also  kindly  let me know its  implication  on passing a shareholders resolution.

Thanks & regards

Komal Gupta

 
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Generally, Veto powers denotes exercising authority of passing / not passing a resolution at the General Meeting or Board Meeting of a Company. 

The Articles of the Association of a Public Company generally provides for casting vote in favour of the Chairman of the Company to exercise such vote (in addition to his own vote) in case of tie over a passing of resolution.

Such a casting vote (additional vote) provision objected by all foregin collaboration partners in their agreements.  However in India this casting vote is given to the Chairman of the Company.

Hope this clarifies,

 

 

 
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Dy Advocate General Punjab & Haryana High Court Chandigarh

I do agree with Dayanadan.

 
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Company Secretary

Veto power is different than casting vote of Chairman.  Casting vote is applicable on in case of equality of votes in favour and against.  In case of equality the Chairman may give vote either in favour or against the resolution and it can be carried accordingly.  Veto power has not been defined in Companies Act.  However, dictionary meaning of veto power is: "to refuse to admit or approve; specifically : to refuse assent to (a legislative bill) so as to prevent enactment or cause reconsideration."

 

Shareholders Agreement and Articles of Association of a company may provide for certain rights to the minority shareholder who has invested funds in the company.  Such powers may include power to refuse capital expenditure over certain specified limit.  In case the representative of the minority group is not in favour of the capital expenditure proposed by the company, he can exercise his right under the Articles which in common terminology is referred to as "veto powers".

 

 

 
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