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Shares With Differential Voting Rights

Shares with Differential Voting Rights (DVRs) allow companies to issue equity shares that may carry different voting powers, enabling promoters to maintain control while attracting new investors. The issuance of DVRs is regulated under Section 43(2) of the Companies Act 2013, requiring specific conditions to be met, such as shareholder approval and compliance with financial obligations. Shareholders have rights including voting, transferring shares, and receiving dividends, while membership can be terminated through various means.

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103 views12 pages

Shares With Differential Voting Rights

Shares with Differential Voting Rights (DVRs) allow companies to issue equity shares that may carry different voting powers, enabling promoters to maintain control while attracting new investors. The issuance of DVRs is regulated under Section 43(2) of the Companies Act 2013, requiring specific conditions to be met, such as shareholder approval and compliance with financial obligations. Shareholders have rights including voting, transferring shares, and receiving dividends, while membership can be terminated through various means.

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SHARES WITH DIFFERENTIAL VOTING

RIGHTS
Meaning
Again the Equity shares/ capital can be further divided into: –
1. Equity shares with voting rights
2. Equity shares without voting rights.
These shares are known as shares with Differential Voting rights related to voting power
(either more voting rights or less voting rights). Some shall carry voting rights and others may
not. The shares with lesser voting rights can carry higher divided rates and vice a versa.
Reasons for issue….

■ The company issues DVRs in order to improve their capital structure


without diluting or losing control or management affairs of the company.
■ This enables the promoters to retain their control over the Company even
when new investors are introduced.
Principle – One share , one vote

■ The issue of normal equity shares means one share one voting right. But in
case of DVRs it means one share may or may not carry one voting rights.
Section 43(2) of the companies act 2013 read with Companies (share capital
& Debentures rules) 2014 provides that companies can issue equity shares
with differential rights subject to the following conditions: –
1. DVRs authorized by Articles of Association.
2. The company shall obtain approval of shareholders by passing general resolution in
General Meeting
3. The company shall not have defaulted in filing annual returns /financial statements for
the last three years immediately preceding the financial year in which it was decided to
issue such shares
4. The company shall not have defaulted in repayment of matured deposits or declared
dividend to the shareholders.
5. In case of listed companies, the issue of such shares shall be approved by postal ballot.
6. The company shall not have defaulted in redemption of its preference shares /debentures
which are due for redemption.
7. The company shall not have defaulted in repayment of instalment of term loan taken
from any public financial institution or state level financial institution or from a scheduled
bank that has become due and payable.
8. The company shall not have defaulted in crediting the amount in Investor Education and
Protection Fund to the Central Government.
9. the company has not been penalized by Court or Tribunal during the last three years of
any offence under the Reserve Bank of India Act, 1934 , the Securities and Exchange Board
of India Act, 1992, the Securities Contracts Regulation Act, 1956, the Foreign Exchange
Management Act, 1999 or any other special Act, under which such companies being
regulated by sectoral regulators
10. The company has not defaulted in payment of dues with respect to statutory payments
relating to its employees to any authority
11. The company shall not have converted its existing equity share with voting rights into
equity shares with differential voting rights and vice versa.
SHAREHOLDER AND MEMBER
Rights of members

■ Changes to MOA or AOA


■ Convene AGM
■ Attend and Vote at AGM
■ Transfer of Shares
■ Receive dividends
■ Minority Shareholder Protection
Termination of membership

■ Transfer of shares
■ Transmission of shares
■ Buy back
■ Forfeiture of shares
■ Surrender of shares
■ Redemption of shares
■ Recission by member
■ Winding up

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