The rights, duties and liabilities of all shareholders are clearly defined at the time of issue of the shares. Once the rights of shareholders are fixed, they cannot be altered unless the provisions of the Companies Act for this purpose are complied with. The rights attached to the shares of any class can be varied only with the consent in writing of shareholders holding not less than 75 % of the issued shares of that class or with the sanction of special resolution passed at a separate meeting of the holders of issued shares of that class. However, the following conditions also must be complied with :-
1.The variation of rights are allowed by the Memorandum or Articles of Association of the Company.
2.In absence of such provision in the Memorandum or Articles of company, such variation must not be prohibited by the terms of issue of shares of that class.