Term of the Week Differential Voting Rights (DVR) Shares Differential voting rights shares give the shareholder fewer voting rights compared to the rights that an ordinary shareholder has. For example, an ordinary shareholder might be eligible to cast one vote per share, while a DVR shareholder might be able to cast one vote for 50 shares held. The voting rights on a DVR differ from one company to another. Some companies that have issued DVR shares include Tata Motors Ltd, Future Retail Ltd, Jain Irrigation Systems Ltd and Gujarat NRE Coke Ltd. Why do companies issue DVRs? Companies issue DVRs to prevent dilution of voting rights. Also, they are used to fund new large projects, as due to fewer voting rights, even a big issue does not trigger an open offer. According to the Companies Bill, issue of such shares cannot exceed 25% of the total issued share capital. Advantages and Disadvantages to Investors: Pros: They are traded at a discount, favorable for investors looking at holding stock in the company irrespective of voting rights. Cons: DVRs are few in number and are thinly traded, making them illiquid investments.
Posted on: Sun, 24 Aug 2014 13:35:04 +0000
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