Equity Share With Differential Rights In Fulton
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Differential voting rights in a company are those shares that give the shareholder extra rights to vote as compared to other shareholders. These rights can be used by the shareholders to gain more votes or less votes based on their choice.
Shares issued with differential rights shall not exceed 74% of the total voting power, including voting power in respect of equity shares with differential rights issued at any point of time.
Tata Motors, Gujarat NRE Coke, Pantaloon Retail, Jain Irrigation are some of the Indian companies that have issued DVR shares. E.g.: Tata Motors' DVR shares carry voting rights which are one-tenth of the ordinary equity shares.
The following are the drawbacks of DVR shares. Limited awareness: Investors often miss out on opportunities to invest in DVR shares because they are unaware of their issuance. Reduced voting rights: DVR shareholders typically have fewer voting rights than holders of ordinary equity shares.
Ing to the Companies Act, 2013, companies limited by shares can issue DVRs, but it will be as a part of the company's share capital. Ideally shares with differential voting rights are considered to be a robust means of raising capital without giving up control over the company.
The voting power in respect of DVR Shares of the company shall not exceed seventy-four percent (74%), of total voting power including voting power in respect of equity shares with differential rights issued at any point of time.
Shares issued with differential rights shall not exceed 74% of the total voting power, including voting power in respect of equity shares with differential rights issued at any point of time.
Procedure For Rights Issue Convene the First Board Meeting: The Board meeting is held, and the resolution for issuing rights shares is passed. The rights issue does not require the approval of shareholders, and hence the board can proceed towards the issue.
The company/startup should pass an Ordinary Resolution for the issuance of DVRs in the General Meeting of the shareholders. The voting power of DVRs equity shares should not exceed 74% of the total voting powers. There should be no default in filing the annual returns by the startups for the past three financial years.
