Differential voting rights
Shares that carry more, or fewer, votes than an ordinary share — and the rules behind them
Rules as on 16 October 2026
Verified 16 October 2026
For training and education only. Not investment advice.
Trainer notes
Start with the default most people assume: one share, one vote. A differential-voting-right share breaks that link in one direction or the other. The topic has changed a lot since older decks were written; flag that early.
The usual rule is one share, one vote. A differential-voting-right share breaks that link.
Such a share carries either fewer votes than an ordinary share, usually with a higher dividend to compensate, or more votes, to keep control with the founders. Both are forms of 'DVR'.
Trainer notes
The single term covers two opposite ideas. Older Indian material described only the fewer-votes kind. Since 2019 the law also allows a more-votes kind for companies listing on the main board.
Three kinds of equity share
Ordinary share
The baseline: one share carries one vote and a normal dividend. Most listed shares are of this kind.
Fewer votes (DVR)
Carries less than one vote per share, often with a higher dividend. Offered to investors who put dividend ahead of a say.
More votes (SR share)
Carries extra votes per share. Held by founders in an executive role, to keep control after a main-board listing.
Take-away: 'DVR' is an umbrella term. A share can differ from the ordinary share by having fewer votes or more.
Sources: Companies (Share Capital and Debentures) Rules, 2014, Rule 4; SEBI ICDR Regulations, reg. 6(3); SEBI LODR Regulations, reg. 41A.
Trainer notes
Superior-rights shares are usually called SR shares in India. The fewer-votes kind is what the old 'DVR' decks described. Dividends and prices on these shares differ from ordinary shares; the structure, not the price, is the lesson here.
How superior votes concentrate control
THE SET-UP
A founder holds 10 lakh SR shares, each carrying 10 votes.
The public holds 100 lakh ordinary shares, each carrying 1 vote.
- Founder's votes: 10 lakh × 10 = 100 lakh votes.
- Public's votes: 100 lakh × 1 = 100 lakh votes.
- Capital: the founder owns 10 of 110 lakh shares = about 9% of the shares.
- Votes: the founder holds 100 of 200 lakh votes = 50% of the votes.
Result: Under a tenth of the capital can carry half the votes. That is the point of superior-rights shares.
Illustration with assumed round figures. Not any real company's holding or vote split.
Trainer notes
A 10:1 ratio is the maximum SEBI allows. The higher the ratio, the smaller the stake needed for control. SEBI's safeguards, on the next slides, limit how long this lasts and where it does not apply.
The two directions, side by side
| Feature | Fewer votes (classic DVR) | More votes (SR share) |
|---|---|---|
| Votes | Less than one vote per share. | Between 2 and 10 votes per share. |
| Dividend / price | Often a higher dividend; trades at its own, separate price. | No special dividend; not separately listed. |
| Who holds it | Public investors who want income over a say. | Founders in an executive position. |
| Why issued | To raise capital without diluting the promoter's control. | To keep founder control after a main-board listing. |
| Governed by | Companies (Share Capital) Rules. | SEBI ICDR and LODR rules, from 2019. |
Sources: Companies (Share Capital and Debentures) Rules, 2014, as amended 2019; SEBI ICDR Regulations, SR framework from 2019.
Trainer notes
Both let a promoter raise money while keeping control, but from opposite ends: by selling low-vote shares to the public, or by holding high-vote shares themselves. SR shares are not listed and traded separately; the ordinary shares are what the public buys.
What changed in the law
DVR cap raised (2019)
The limit on differential-rights shares was changed to 74% of total voting power, from the earlier 26% of post-issue capital.
Profit test dropped (2019)
The old rule that a company needed three years of distributable profits before issuing DVR shares was removed.
SR framework added (2019)
SEBI allowed superior-rights shares for founders of tech-intensive main-board listings, with safeguards.
SR rules eased; big DVR gone
SEBI relaxed SR eligibility in 2021. In 2024 a large listed DVR was cancelled into ordinary shares.
Sources: Companies (Share Capital and Debentures) Amendment Rules, 16 Aug 2019; SEBI ICDR SR framework 2019, eased 2021.
Trainer notes
The 2019 SR framework targets technology-intensive firms. Since 2019 SEBI's listing rules (LODR 41(3)) also stop listed companies issuing new fewer-vote shares. The 2024 cancellation removed a large listed DVR.
The safeguards on SR shares
Coat-tail provisions
On certain key decisions — such as related-party deals with an SR holder, delisting or a buy-back — each SR share counts as one vote.
Sunset clause
SR shares convert to ordinary shares five years after listing, extendable once by five years; the SR holder cannot vote on that extension.
Eligibility limits
Only a founder in an executive role may hold them, with an individual net worth capped at ₹1,000 crore under the eased 2021 rules.
Source: SEBI ICDR and LODR Regulations, SR framework (2019), amended 26 Oct 2021.
Trainer notes
SR shares also convert earlier on events such as the founder's resignation or death. These safeguards exist because superior votes override the one-share-one-vote principle that protects minority shareholders, including mutual funds that hold the ordinary shares.
Where things stand
The key numbers in India's differential-voting-rights rules today.
- SR VOTING RATIO (MAX)
- 10:1An SR share may carry up to 10 votes to an ordinary share's one.
- DVR CAP (VOTING POWER)
- 74%Differential-rights shares capped at 74% of total voting power, since 2019.
- SR SUNSET
- 5 yrsSR votes lapse five years after listing, extendable once by five years.
- BIG LISTED DVR
- 2024A large listed DVR was cancelled in 2024.
Sources: SEBI ICDR Regulations (SR framework, 2019, eased 2021); Companies (Share Capital) Amendment Rules, 2019; 2024 cancellation (exchange and press reports).
Trainer notes
These are rules and a dated corporate event, not market prices, so no 30-day lag applies. We state the framework; we do not advise anyone to buy or avoid any share class.
If you learnt this from older material
What older decks say
- A DVR means fewer votes than an ordinary one.
- DVR shares cannot exceed 26% of post-issue paid-up equity capital.
- A company needs three years of distributable profits to issue them.
- A large automaker's DVR is actively traded.
What holds now
- Since 2019 a DVR can also mean superior (more) votes.
- The cap is 74% of total voting power.
- That three-year profit requirement was removed in 2019.
- That DVR was cancelled into ordinary shares in 2024.
Take-away: The idea is older, but the Indian rules and the best-known example both changed since 2019.
Sources: Companies (Share Capital) Amendment Rules, 2019; SEBI ICDR SR framework, 2019; 2024 cancellation (reports).
Trainer notes
Older decks predate the 2019 law changes and the 2019 SR framework, and were written while the large listed DVR still traded (it was cancelled in 2024).
Four things people get wrong
Misconception'DVR always means fewer votes.'
What is trueSince 2019 it can also mean more votes for IPO-bound firms. The term just means votes differ from the ordinary share.
Misconception'SR holders can outvote everyone.'
What is trueNo. Their total votes are capped at 74%, and on key decisions such as related-party deals each SR share counts as one vote.
Misconception'Superior votes last forever.'
What is trueA sunset clause converts them to ordinary shares after five years, extendable once by five years.
Misconception'A higher dividend is all that differs.'
What is trueIt is a different instrument: fewer votes, its own price, and sometimes thin trading. We do not rate one above the other.
Sources: SEBI LODR Regulations, reg. 41A; SEBI ICDR Regulations, reg. 6(3); Companies (Share Capital and Debentures) Rules, 2014, Rule 4.
Check yourself
Question 1: A founder holds 10 lakh SR shares at 10 votes each; the public holds 100 lakh ordinary shares at one vote each. What share of capital and of votes does the founder have?
Answer: Capital: 10 of 110 lakh shares = about 9%. Votes: 100 of 200 lakh votes = 50%. Under a tenth of the capital carries half the votes.Question 2: Name two safeguards SEBI attaches to superior-rights (SR) shares.
Answer: Any two of: coat-tail provisions (one vote each on certain key matters); a sunset clause (convert to ordinary shares after five years, extendable once); eligibility limited to an executive founder within a net-worth cap.Question 3: What are two ways the law on DVRs changed in 2019?
Answer: The cap on fewer-vote DVR shares became 74% of total voting power (from 26% of capital), the three-year distributable-profit requirement was removed, and SEBI introduced the superior-rights (SR) framework for main-board listings.
Sources and disclaimer
Sources for the figures in this explainer
- DVR cap changed to 74% of total voting power; three-year distributable-profit requirement removed: Companies (Share Capital and Debentures) Amendment Rules, 2019, 16 Aug 2019 (Rule 4).
- Superior Voting Rights (SR) framework for main-board IPOs — ratio 2:1 to 10:1 (ICDR reg. 6(3)); coat-tail, five-year sunset extendable by up to five years (LODR reg. 41A): SEBI, 2019.
- SR eligibility eased — SR shareholder net worth cap raised to ₹1,000 crore (individual basis), RHP gap cut to three months: SEBI, effective 26 October 2021.
- A large listed DVR (lower-voting shares, one-tenth of a vote with a higher dividend) cancelled into ordinary shares in 2024; suspended from trading 30 Aug 2024: exchange and press reports.
- The worked example and quiz use invented, round figures and do not refer to any real company's shareholding or vote split.
This material is for training and investor education only. It is not investment, tax or legal advice and is not a recommendation to buy, sell or hold any security or scheme. Examples use assumed figures unless a source and date are shown. Mutual fund investments are subject to market risks; read all scheme related documents carefully. Trustner Asset Services Pvt. Ltd. is an AMFI-registered Mutual Fund Distributor (ARN-286886).