Differential voting rights

Differential voting rights (DVR') apply to equity says which hold dividend and/or voting differential rights. In India, as part of its share capital, section 43(a)(11) of the companies Act, 2013 requires a company limited by shares to issue DVRs. Introduced in 2000 for the first time, DVRs are seen as a viable alternative to raise investment and at the same time maintain leverage over the company. Recently, the Securities and Exchange Board of India has revived interest in DVRs by releasing a consultation paper on the " issuance of differential voting rights (DVRs) shares" and subsequently approving the mechanism.

DVRs Before the Companies Act, 2013

In India, DVRs were first incorporated by an amendment to section 86 of the Companies Act of 1956, which specified that a company's share capital limited by shares is restricted to only two categories, namely equity capital and preferred share capital Under the aforementioned section 86, Equity share cap’1tal was allowed to have differentiated dividend, voting or otherwise rifts, in compliance with certain rules and subject to the conditions specified by the government. Two Indian firms, namely Tata Motors and Pantaloons Retails (now renamed Fñturc Enterprises Limited), received DVRs with 1/l0th (one out of ten) voting rights compared to regular shares in exchange for a 5 percent (five percent) greater dividend compared to regular shares under this provision.
Similarly, Jagatjit Indies Limited's 2,500D00 (two million five hundred thousand) preference shares (with DVRs) Were Issued to a company owned by. Karamjit. This issuance of DVRS QffQctlvely increased the voting rights of Mr. Karamjit and gave him considerable influence over Jagatjit Industries Limited, even though such a leap did not reprint his contribution to the economy. Although this change was questioned by the company's minority shareholders, the Company Law Board approved the allocation of preferential shares with DVRs, which is also legally permissible under section 86 of the Old Act.

DYRs under the Companies Act, 2013

Section 43(1) of the Companies Act (which replaced the Old Act) is similar to Section 86 of the Old Act and allows the issuance of equity shares with differential voting rights. However, Section 47 of the Companies Act provi&s that every member of a company limited by shares aryl holding equity share capital therein shall have a right to vote on every resolution placed before the company.
Thus, it gives every shareholder of a company the right to vote on every resolution presented before the company, in proportion to his/her share of the paid-up equity share capital. However, section 47 of the Companies Act is subject to section 43 of the Companies Act which, means that companies can issue shares with differential voting rights, notwithstanding the implicit '- share-one-vote' requirement under section 47.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.