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ARTICLE · 20 SEPTEMBER 2019

Another Step Forward By India Inc : DVR Shares

Nishith Desai Associates
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Issuance of shares with differential voting rights by tech companies to their promoters, now permitted.

IndiaCorporate/Commercial Law
Aishwarya H,
Aishwarya H,
Harshita Srivastava
Harshita Srivastava
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  • Issuance of shares with differential voting rights by tech companies to their promoters, now permitted.
  • Promoters must hold an executive position in the company and the maximum voting rights is limited to 10:1.
  • Total voting rights of shareholders holding shares with differential voting rights limited to 74%.
  • Post listing, in case of decisions relating to certain matters, the holders of shares with differential voting will have rights akin to those of ordinary shares.
  • Sunset period for conversion into ordinary shares.

BACKGROUND

Shares with differential voting rights ("DVRs") are those which have rights attached to them that are disproportionate to the economic rights over the shares. Shares with DVRs can either have superior voting rights (i.e. multiple votes on one share) or inferior voting rights (i.e. a fraction of the voting right on one equity share) or differential rights as to dividend. Shares with DVRs which have been more popular in the

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