Updated on March 6, 2023
DVR share means share with ‘Differential Voting Rights’. These are shares which are issued with differential voting and differential dividend rights. DVR shares offer lower or fewer voting rights compared to common shares. DVR shares are paid a dividend premium of 10-20% and look beneficial for small and retail shareholders as they normally do not participate in the voting process.
Reasons for issuing DVR shares
Some reasons for issuing DVR shares are:
1. Protection of the company’s own interests.
2. Business growth and expansion without dilution or sharing control (through voting rights).
3. DVR shares help in safeguarding against hostile takeovers as there are no voting rights for gaining majority.
Reasons for investing in DVR shares
Reasons for investing in DVR shares are:
1. As retail shareholders generally do not participate in business affairs of the company or do not even ‘vote’, DVR shares present a good bargain.
2. DVR shares come at discounted rates and hence at lower costs.
3. DVR shares offer higher dividend yields when compared with common shares.
Limitations of DVR shares
Limitations of DVR shares are:
a) DVRs do not have a high liquidity advantage as compared to the common shares.
b) Large investors prefer the safety of voting rights offered by common shares.