Government relaxes norms for shares with differential voting rights

The Ministry of Corporate Affairs has amended the provisions relating to the issue of shares with Differential Voting Rights (DVRs) provisions under the Companies Act. 

Its objective is to enable promoters of Indian companies to retain control of their companies in their pursuit for growth and creation of long-term value for shareholders. 

The key change brings in an enhancement in the previously existing cap of 26 per cent of the total post-issue



paid-up equity share capital to a revised cap of 74 per cent of the total voting power. 

Another key change brought about is the removal of the earlier requirement of distributable profits for 3 years for a company to be eligible to issue shares with Differential Voting Rights. These two initiatives have been taken by the Government in response to requests from innovative tech companies and startups and to strengthen the hands of Indian companies.