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Why companies issue equity shares with differential Voting Rights?

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In case the company issues shares with differential voting rights that means, generally one share carry one voting power. But in the case of differential voting rights, one share carries more than one voting right or carries with lesser than one voting rights.

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Equity shares with differential rights generally companies give because they want to improve the capital base but they do not want to lose the control or management of the affairs of the company. By issuing shares with differential voting rights, the share capital will increase but the control and management is still remains in the hand of promoters. Hence the management of the company will not be diluted by issuing shares with differential rights thereby helping the minority shareholders. That is these minority shareholders do not want the change in management but still wants to increase the capital base. In such cases, the issue of shares with differential rights is the correct answer.

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