The Sebi's consultation paper on differential voting rights (DVRs) for unlisted firms strikes the right balance between promoters' interests and those of minority shareholders. Allowing start-up founders to hold superior voting rights (SR shares) will help them raise funds without losing control over the company.
One SR share can have a maximum of 10 votes. If approved as proposed, the new age companies can list themselves on stock exchanges provided promoters have held SR shares for at least a year. The paper also calls for diluting the need to have a three-year-record of distributing profits to issue shares with DVRs.
Meanwhile, the mandate to have a sunset clause of five years after listing and treating DVR shares as ordinary shares on crucial matters such as appointment and removal of independent directors and auditors, change in management control or winding up of the company etc will ensure corporate governance remains in check.