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The Provisions of Rules corresponding to this chapter shall apply to
Listed companies
All Unlisted public companies All private companies (so far as they do not contradict with
regulations of SEBI)
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Section 43--> Kinds of Share Capital
Preference
Equity shares
shares
With differential
voting rights
What preference do the preference shares have over equity shares? Or put simply, what is the difference between both?
Preference shares have preference over equity shareholders for two things-:
a) Payment of dividend
b) Repayment of capital on winding up
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Ordinary share DVR shares
The company has 1000 shares of Rs. 10 each. Mr. A Mr. A holds 25% of ORDINARY shares and Mr. B
holds 25% of shares and MR. B holds 30 % of holds 400 DVRs (out of total 1000 shares) having
shares. Rest are hold by others. voting power of 1:4.
A DVR share is like an ordinary equity share, but it provides fewer voting rights to the shareholder.
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What are the Conditions for issuing equity shares with Differential Voting Rights ?
❑ Authorization in AOA
❑ Ordinary Resolution at General Meeting of shareholders.(In case of listed company, approval through postal ballot is
sufficient).
What is the maximum permissible voting power in case of shares with DVR? ( MCQ)
❑ Voting Power in respect of shares with differential voting rights of the company shall not exceed 74% of total voting
power including voting power in respect of equity shares with differential rights issued at any point of time.
❑ No default in filing financial statements and annual returns for three financial years immediately preceding the
financial year in which it is decided to issue such shares.
The company having consistent track record of distributable profits for the last three years
( Above point is not a condition now. Important )
Ordinary shareholders(Other
than DVR)
DVR shareholders
MCQ Worthy Point
DVR shareholders
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Conditions for issuing equity shares with Differential Voting Rights
❑ The company has not been penalized by Court or Tribunal during the last three years of any offence under the RBI
Act, the SEBI Act, the SCRA, the FEMA or any other special Act.
Can a company convert its ordinary shares into DVR shares or vice versa?
❑ The company shall not convert its existing equity share capital with voting rights into equity share capital carrying
differential voting rights and vice–versa.
Register of members having DVR shares will be maintained in which form ?
❑ Where a company issues equity shares with differential rights, the Register of Members maintained in Form No.
MGT 1 shall contain all the relevant particulars of the shares so issued along with details of the shareholders.
Quick Questions for Revision
Voting Power in respect of shares with differential voting rights of the company shall not exceed
___________of total voting power including voting power in respect of equity shares with differential 74%
voting rights issued at any point of time.
To issue shares with DVR, a company should not be penalized under RBI Act, FEMA Act etc. during
3
the last _______ years
Happy Learning!