Sebi proposes dual voting rights plan

Sebi proposes dual voting rights plan

Bengaluru, Mar 21: Sebi has issued a draft framework, which would allow homegrown companies to issue shares with differential voting rights (DVRs), and kept it open for public comments till April 20. If approved as proposed, companies will be able to issue shares with either superior or fractional voting rights.
This comes at a time when founder-control over strategic decisions in a company against growing investor influence is one of the on-going debates, especially in tech-startups.
This is because the founders dilute their stakes, while raising capital from investors. This also comes at a time when Larsen & Toubro has made a hostile bid for software company Mindtree, where founders hold 13% stake.
Most recently, cab-hailing major Lyft’s IPO documents show how founders of the company control majority of decision-making rights due to dual-class voting structure. They have 20 votes for every one vote of an investor in the company. This could also help companies fight better in case of a hostile takeover attempt by other investors or companies.
Superior rights would essentially mean it will have stronger voting power than an ordinary share.