Companies can now have up to 74% Differential Voting Rights (DVR) shares
- The Central Government has liberalized the rules that would allow Indian companies to raise share capital without diluting the voting rights of all existing shareholders.
- Before Amendment: Prior to the amendment, the Companies (Share Capital and Debentures) Rules of 2014 allowed the issue of shares with differential voting rights, with the condition that—the business should have distributable profits for the previous three years, and the capital raised through shares with differential voting rights must not exceed 26% of the post-issue capital.
- After Amendment:
(i) The amendment has removed the condition of having three years of distributable profits.
(ii) Companies can now have up to 74% Differential Voting Rights (DVR) shares of the total post issue paid-up share capital. This limit has been revised from 26%.
(iii) Now the Employee Stock Options (ESOPs) can be issued by startups to promoters or directors holding more than 10% of equity shares for 10 years from the date of their incorporation. Earlier this time period was 5 years.
Points to remember:
- New limit of Differential Voting Rights (DVR) shares for companies? – 74%
- Companies can now have up to 74% Differential Voting Rights (DVR) shares of the total post issue ________ capital?- paid-up share
- Employee Stock Options (ESOPs) can be issued by startups to promoters or directors holding more than 10% of equity shares for ________ years?- 10 years