MCA addresses differential voting rights

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voting rights

The Ministry of Corporate Affairs (MCA) notified the Companies (Share capital and Debentures) Amendment Rules, 2019 on 16 August 2019, to amend the provisions in the Companies (Share capital and Debentures) Rules, 2014 relating to issuance of shares with differential voting rights.

Shares with differential voting rights (DVRs) are shares that have rights that are disproportionate to the economic rights over the shares. Shares can be issued with differential rights to a shareholder either in terms of superior voting rights, inferior voting rights, or differential rights as to dividend.

The MCA has issued a press release stating that the intent of the amendments made to the rules is to enable promoters of Indian companies to retain management control of the company, despite raising substantial foreign equity from global investors.

The changes have come about in response to representations made by innovative technology companies and startups that have identified global investors interested in investing in such companies and acquiring controlling stakes in the share capital of such companies.

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