The Government of India vide notification dated 16 August 2019
made crucial changes in the Companies Act, 2013 that relaxed
certain conditions with respect to issue of shares with
differential voting rights (DVRs).
Fresh amendments made in the Companies (Share Capital &
Debentures) Rules, 2014 of the Companies Act, 2013 will permit
Indian companies to issue up to seventy-four (74%) per cent shares
of the total post issue paid-up share capital with differential
voting rights. Additionally, the requirement of distributable
profits in the last three (3) years before Indian companies can
issue this kind of shares has been done away with.
The concept of differential voting rights or dividend underlying
a share is not alien under the Indian company law. The Companies
Act, 1956 (which was thereafter succeeded by the Companies Act,
2013) provided flexibility to a private company, which was not a
subsidiary of a public company, to issue such shares.
