Business Companies 17 Aug 2019 Government ring-fenc ...

Government ring-fences start-ups with new DVR rules

FC INVESTIGATIVE BUREAU
Published Aug 17, 2019, 12:51 am IST
Updated Aug 17, 2019, 12:51 am IST
The initiatives have been taken in response to requests from innovative technology companies and startups.
The ministry also noted such Indian promoters have had to cede control of companies, which have the prospects of becoming unicorns, to foreign investors while raising capital.
 The ministry also noted such Indian promoters have had to cede control of companies, which have the prospects of becoming unicorns, to foreign investors while raising capital.

New Delhi: In a move to help start-ups in the country, the government on Friday eased the norms for shares with differential voting rights (DVR). With the amended rules, companies can now have up to 74 per cent DVR shares of the total post-issue paid-up share capital. The limit has been revised upwards from 26 per cent.

“Another key change brought about is the removal of the earlier requirement of distributable profits for three years for a company to be eligible to issue shares with DVRs,” the Ministry of Corporate Affairs said in a release.

 

“The initiatives have been taken in response to requests from innovative technology companies and startups. It would also strengthen the hands of Indian companies and their promoters who have lately been identified by deep-pocketed investors worldwide for acquisition of controlling stake,” the ministry said.

The ministry also noted such Indian promoters have had to cede control of companies, which have the prospects of becoming unicorns, to foreign investors while raising capital.

But the ministry has tightened the rules for issuing Employee Stock Options (ESOPs) to promoters and directors.

ESOPs can now be issued by startups to promoters or directors holding more than 10 per cent of equity shares for 10 years from the date of their incorporation. The time period for such ESOPs was five years earlier.

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Location: India, Delhi, New Delhi




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