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Whether differential voting right are against the principle of corporate governance wherein differential treatment can be done among shareholder holding equal or greater number of shares?

Differential Voting Rights (DVRs) means shares granting the holder differential voting rights (superior or inferior voting rights) as opposed to the company's ordinary shareholders. The implementation of this system by companies act of 2013[1] and SEBI regulations means that public money can now be taped by the promoters/founders without fear of losing good corporate governance control. This raises a question that why will an investor buy such shares which has inferior decision-making powers.

The answer is that this scheme lets the pool of investors which are only interested in getting the higher dividends while lacks interest in possession of control over the company as differential voting rights shares are relatively cheaper to buy and the investor enjoys a similar dividend rates as the normal shares. All this also initiated a debate of whether differential voting rights is against the principal of good corporate governance which is based upon the three major pillars of Transparency in operations, accountability towards the shareholders and fairness in dealing.

For breaching the one share-one vote principle and destroying shareowner democracy, differential voting rights have long been criticized. nonetheless, commercially, one share-one vote comes with costs because it discourages businessmen from taping public funds for concern of losing power. Countries like Hong Kong and Singapore that until recently had skipped over on some premium listings didn't permit differential voting rights, prompting them to re-examine their listing rules.

Corporations like Alibaba, for instance, have opted to be listed on the New York exchange, as opposed to the Hong Kong exchange ('HKEX') and also the London exchange, because the latter two haven't allowed firms using differential voting rights to be listed.

Since then, Hong Kong and Singapore have amended their laws to produce for differential voting right and elaborate checks and balances. In alternative jurisdictions, SEBI has had the advantage of scrutiny numerous formats of differential voting rights and formulating a format for our country.

As a consequence, SEBI ICDR rules currently permit associate degree IPO-bound company to own "superior right equity shares" (SRES). i.e., to list the standard shares, equity shares with superior voting rights relative to any or all alternative equity shares issued by the Companies.

So as per my observations, since concept of differential voting rights itself is not against the good corporate governance since it could be implemented along with principles discussed above by enacting regulatory rules by SEBI and other authorities.

  1. Companies Act, 2013
  2. SEBI ICDR Regulations
Articles / Blogs:
  1. Dhania, G. (2019, September 04). Differential Voting Rights: Does The Corporate Governance Mechanism Match Up? - Corporate/Commercial Law - India. Retrieved January 30, 2021,
  2. L. (2019, June 01). What are Differential Voting Rights? Retrieved January 30, 2021,,Ordinary%20shareholders%20of%20the%20company.&text=The%20shares%20issued%20withDifferential%20Voting,DIFFERENTIAL VOTING RIGHTSs)%20cannot%20be%20changed%20later.
  3. Joseph, V. (2019, November 12). Introducing Differential Voting Rights - Corporate/Commercial Law - India. Retrieved January 30, 2021, from,part%20of%20its%20share%20capital.
  4. Goyal, D. (2019). Notified Sections of Companies (Amendment)) Act, 2020- Analysis. Retrieved January 30, 2021, from
  1. Section 43(a)(ii), Companies Act, 2013

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