Which companies can issue DVR?

The list of companies that have issued DVR shares includes Tata Motors, Pantaloons Retail India (Future Retail group), Gujarat NRE Coke and Jain Irrigation. The trading volume in these is 75-90% less than in ordinary shares.

What is differential equity shares?

The shares with Differential Voting Rights (DVRs) in a company means those shares that give the holder of the shares the differential rights related to voting, i.e. either more voting rights or less voting rights compared to the ordinary shareholders of the company.

Why do companies issue DVR?

Why Do Companies Issue DVR shares? DVR shares are issued by the companies to raise funds by bringing in passive investors, while safeguarding dilution of voting rights, with less involvement in the management of the company.

Can private companies issue DVR?

For private companies, these can be issued to the investors just like normal equity but the owner/founder of the company gets to retain the control of the company. For instance, if a normal equity share has declared a dividend of 1% then a DVR share may declare it at 5%.

What is differential voting rights in India?

Introduction. Differential voting rights (“DVR”) refer to equity shares holding differential rights as to dividend and/or voting. In India, section 43 (a) (ii) of the Companies Act, 2013 (“Companies Act”) allows a company limited by shares to issue DVRs as part of its share capital.

Can a company issue equity shares without voting rights?

Government notification dated June 5, 2015 allows a private company to issue its shares without voting rights subject to certain conditions. Apart from Tata Motors, Pantaloons Retail India (Future Retail group), Gujarat NRE Coke and Jain Irrigation are some of the prominent companies that have issued DVR shares.

What are the different types of shares?

What are Shares and Types of Shares?

• Preference shares. As the name suggests, this type of share gives certain preferential rights as compared to other types of share.
• Equity shares. Equity shares are also known as ordinary shares.
• Differential Voting Right (DVR) shares.

Who can be appointed as director of a company?

According to the Companies Act, only an individual can be appointed as a member of the board of directors. Usually, the appointment of directors is done by shareholders. A company, association, a legal firm with an artificial legal personality cannot be appointed as a director. It has to be a real person.

What is differential dividend?

Differential Dividend means a dividend declared by the Company where the amount of dividend per Ordinary Share received by a shareholder depends upon whether the shareholder has agreed to accept a reduced dividend.

What is the difference between DVR shares?

DVR stocks provide a higher dividend to owners as a form of compensation for the lower voting rights. Ordinary share dividend is always lower than DVR since such shareholders retain the right to vote and make important company decisions. DVR shares are priced lower, as they are often extended at discounts.

Can preference shares issued with differential rights?

In case the company issues shares with differential voting rights that means, generally one share carry one voting power. The company shall not have defaulted in redemption of its preference shares /debentures which are due for redemption.

Are there any equity shares with differential rights?

Again in the equity share capital there is another class of shares i.e. Equity shares with differential rights.

What are the two types of equity shares?

Under the Companies Act, 2013 (the Act) there are two kinds of equity shares: (i) equity shares with voting rights; and (ii) equity shares with differential voting rights. Equity shares with differential voting rights (DVRs) are as to dividend, voting or otherwise in accordance with such rules as may be prescribed.

When to issue equity shares with DVRs?

If the investment is made by a private equity (PE) fund or venture capital fund or any strategic investor, a company will prefer to issue equity shares with DVRs. This instrument may be preferred by companies when certain investors prefer to participate in the decision-making of the company (i.e. voting) over dividend payment or vice versa.

How are equity shareholders paid in a company?

Equity shareholders are paid on the basis of earnings of the company and do not get a fixed dividend. They are referred to as ‘residual owners’. They receive what is left after all other claims on the company’s income and assets have been settled.