Differential voting rights

Why is the Companies Bill 2009 conspicuously silent about shares with differential voting rights?

Shreelatha Namboodhri, Kottakal

Shares with differential voting rights were permitted for the first by the amendment Act of 2000. But it has turned out to be a damp squib with just two companies, Tata Motors and Pantaloon, evincing interest in it.

The genesis of shares with differential voting rights is rooted in the reality that shareholders other than promoters are hardly interested in voting rights; instead they are focused on their economic rights such as dividend and bonus issues.

Given this proclivity, it was thought that small shareholders will settle for lesser voting rights in lieu of a small hike in dividend vis-a-vis shares carrying full voting rights. But soon it was realised that a share becomes a hot commodity when a raider sets his sights on a company.

And a raider obviously is more interested in shares with full voting rights because he is not in for a passive stay in the company he is seeking to buy into.

The market regulator was right in realising that shares with lesser voting rights effectively, if unwittingly ,belittle the small shareholders when a takeover battle is raging. Hence the rethink in the Ministry of Corporate Affairs.

An apparent omission

When an individual transfers his or her assets to his or her daughter-in-law without adequate consideration, the income therefrom bounces back to the donor. Why doesn't this law apply to gifts to sons-in-law?

Jenny Fernandez, Panaji

Feminists have often wondered with a sense of injured innocence at this seeming omission. But the truth is the government is aware of the Indian social realities in this regard.

While the daughter-in-law, especially the one with no income or little income, can be roped in as an ally in tax evasion, the groom cannot be. In-laws may not mind this seeming imposition especially if they are past their eighties now that the government has opened its purse strings to very senior citizens.

Proxies at AGM

Why are proxies not allowed to speak at the general meetings of companies?

Pushpendra Tiwari, Nainital

Filibustering is the nightmare of chairpersons of companies and speakers of legislatures. It means speakers hogging the mike for a sustained period of time with a view to obstructing legislative business. Much the same was apprehended in company meetings if proxies are allowed to hold forth. But this can be easily overcome.

All that a professional speaker has to do is to acquire a single share of the company thus becoming its full-fledged member who in any case is allowed to speak even if he represents others as a proxy. The point is a rival intent on disrupting the proceedings can well have his way by vesting the intended proxy with privileges of a full-fledged member.

Copyright and patent

What is the difference between copyright and patent?

Bhaskar Ghosh, Kolkata

Copyright is available to authors and painters among others whereas a patent is essentially a protection for inventors.

An author would not be worse off even if he is not careful in getting his rights registered whereas non-patenting of an invention before a rival steals a march could be suicidal to an inventor's economic interests. But a copyright is qualitatively inferior to a patent right in that anyone can do the same work in a different form.

In other words, copyright extends to form, and not to an idea whereas the patent is all about an idea which cannot be replicated by others if patented.

Thus I cannot produce a drug in India through a different process if it is patented in India by a drug company from anywhere in the world but I can import all the ideas of the Nobel laureate, Prof Samuelson, were I to write a book on economics so long as I do not substantially imitate the form of his book.

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(This article was published on May 15, 2011)
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