Differential Voting Rights (DVR) shares are shares that have superior voting rights and are useful in the case of companies that are trying to retain control of the company although the outside institutions are having a much bigger stake. As per the announcement made in the latest SEBI board meeting, the following are the highlights of the DVR announcement made by SEBI.

· DVR or Superior Rights shares will be only permitted in case of technology companies that is operating in the areas of IT, intellectual property, biotechnology etc.

· The shareholder getting the SR (superior rights) shares should be part of the promoter group whose collective net worth does not exceed Rs.500 crore. Thus established companies may not be eligible for this benefit.

· The SR shares shall be at par with ordinary shares in all aspects except in case of voting rights where the SR shares will have higher voting rights. However, all the SR shareholdings cannot exceed 75% of total voting rights.

· To prevent any misuse of the SR shares by the management, SEBI shall only allow this facility with proper checks on the corporate governance front.

· SR shares will be converted into ordinary shares if the SR shareholder resigns or passes away. Even otherwise, such SR shares will automatically cease to exist at the end of 5 years and shall be converted into ordinary shares for voting rights purposes. Of course, such validity can be extended every five years.

Just to give you an example, these kinds of SR shares would have been useful to the promoter shareholders of Mindtree in defending themselves against the hostile takeover bid made by Larsen & Toubro.