Difference Between Ordinary Shares and DVR Shares
“One Share is Equal to One Vote” was the standard followed by Indian economists in the financial world for several years until 2000, when DVR (Differential Voting Rights) was launched. DVR is the share with low or high voting rights compared to the standard or ordinary shares.
Under the new law, companies and businesses were restricted from providing equity shares with higher voting rights, thereby DVR was introduced to limit the voting rights of equities. So, DVR Shares in the Indian financial markets offer restricted voting rights.
Before delving deeper to learn the difference between ordinary shares and DVR Shares, you must know what these shares mean.
What are DVR Shares?
Differential Voting Rights, or DVR Shares, allow companies to heighten their capital while protecting the interests and diluting the owner’s power over the company. Any investors interested in investing in a share without involving in the company’s workings or operations must buy the DVR shares.
DVR shares give freedom to the company to control the rights they want to provide holders. It enables the company to stay protected from a hostile takeover. When the shareholders lack voting rights, they can’t gain control over the company as they will lack a majority.
What are Ordinary Shares?
Ordinary shares are those shares that give the company’s ownership capital to the shareholders. They are also referred to as common equities. Shareholders of ordinary shares can also vote at the company’s annual general meetings. Even a single ordinary share gives rights to the shareholder to vote.
Besides, the shareholders also receive returns for their contribution to the company’s capital needs. The company decides the profit or dividends for the shareholders. The bonuses vary depending upon the volatility in the market, and hence it keeps changing.
Difference Between DVR Shares & Ordinary Shares
|DVR Shares||Ordinary Shares|
|Voting Rights||DVR Shareholders have minimal voting rights compared to the investors of ordinary shares||Ordinary shareholders get higher voting rights compared to DVR shareholders.|
|Dividends||The dividends shareholders receive are higher compared to ordinary shareholders. But it is compensated by the low voting rights.||The dividends shareholders receive are low compared to the DVR shareholders. However, the shareholders get higher voting rights and participate in AGM and significant decisions.|
|Prices||DVR shares are offered with higher discounts. So, the money needed for investment is comparatively low.||No discounts are offered for ordinary shares; hence, higher money is needed for investing in ordinary shares.|
These are the significant differences between DVR shares and ordinary shares. Both the shares hold certain rights and benefits, like share issue rights and bonus shares.
Hopefully, the difference between DVR and Ordinary Shares is clear by now. There are many benefits to investing in DVR shares, but it limits the shareholder’s voting rights, preventing investors from investing in DVR shares. So, you must always check all the options to know which share is suitable based on your portfolio and invest in the share accordingly.