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SEBI announces new framework for tech companies to issue DVR shares and undertake IPOs

Markets regulator SEBI on Thursday issued a new framework for certain technology companies to issue differential voting rights (DVR) shares from July 1, making it easier for the promoters of tech start-ups to go in for initial public offerings. It proposed allowing technology companies that issue Differential Voting Rights (DVR) shares to undertake an initial public offering (IPO) of their ordinary shares, subject to several conditions, which are summarised below. DVR shares, as their name suggests, carry disproportionate voting rights as compared to their economic ownership and thus go against the principle of one share, one vote. They can carry superior voting rights (more than one vote per share) or fractional voting rights (less than one vote per share), or simply have differential rights as to the dividend. They are popular with founders and promoters of start-ups as they help them retain control over the company's decisions while also raising funds from the market. Start-up entrepreneurs, who have been calling for differential voting rights shares for some time to fend off hostile takeovers and pressure from powerful investors, have welcomed the decision. https://twitter.com/bhash/status/1144234977128620034 SEBI's new framework Here is a summary of SEBI's new framework for issuing DVR shares (the full document is at the bottom of this post): Eligibility conditions: A technology company with superior voting rights shares (SR shares) will be permitted to do an IPO of only ordinary shares if it meets the conditions below. SEBI defines a tech company as one that is "intensive in the use of technology, information technology,…

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