Equity Share With Differential Rights In Massachusetts
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Equity shares with differential voting rights (DVRs) are the kind of shares issued by a company that offers shareholders varying levels of the voting power. This means that some shareholders have more voting power than others and this can significantly impact the control and decision-making capabilities of the company.
A company may issue equity shares which carry rights only with respect to dividend and do not carry any voting rights. Superior voting right means any right that gives the shareholder more than one vote per share.
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.
Disadvantages Of DVR Shares are as follows: Lower voting rights, reducing influence in company decisions. Potentially less liquid, making them harder to sell. May be viewed as less attractive to certain investors who value voting power.
Issue of Prospectus, Receiving Applications, Allotment of Shares are three basic steps of the procedure of issuing the shares. The process of creating new shares is known as Allocation or allotment.
Shares with DVR are essentially similar to an ordinary share. However, it extends limited voting rights to the shareholders. Typically, the number of shares with DVR to be held by each company differs from one firm to another. Nevertheless, shares with DVR cannot be more than 25% of the aggregate issued share capital.
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.
Eligibility Criteria to Issue DVR Shares Companies must have a record of distributable profits for the past 3 years. There should not be any default in filing the annual returns for the past 3 financial years. There was no default in repaying deposits or loans.
