Striking A Balance On Differential Voting Rights

The Securities and Exchange Board of India (SEBI) recently issued a consultation paper seeking public comments on a proposed regulatory regime for issuance of equity shares with differential voting rights (DVRs) by listed and to-be-listed companies in India. Unlike conventional one share, one vote equity shares, DVRs allow promoters to have voting power that is disproportionate to their ownership interest, which enables growth companies to raise capital without promoters losing control, and insulating them from hostile takeovers.

SEBI is now seeking to re-examine the regulations applicable to DVR issuances by allowing superior voting right (SR) share issuances to promoters prior to the initial public offering (IPO) while permitting the issuance of fractional voting right (FR) shares within one year from the IPO.