In a major change of rule, the government has allowed superior voting shares to list on exchanges in the same way as other shares, helping promoters and early-stage investors and private equity (PE) and venture capital (VC) funds retain some advantages.
The new norms were put in place on Thursday, through an amendment to the Securities Contract Regulation Rules, by introducing two new provisions dealing with shares with superior voting rights.
“A public company which has issued equity shares having superior voting rights to its promoters or founders and is seeking the listing of its ordinary shares for offering to the public shall mandatorily list the said equity shares having superior voting rights along with the ordinary shares, at the same stock exchange where the ordinary shares are proposed to be listed,” it said.
In addition, the requirement of minimum offer and allotment will not be applicable to the listing of the said equity shares having superior voting rights.
“One, promoters, founders of companies and PE/VC investors in companies who got classified as promoters and who carry superior voting shares can now get these shares listed and can get easy liquidity of their shares without surrendering their superior rights. Two, this will also help promoters raise capital in their companies without losing control of their companies. This is usually adopted across various companies such as Google, Facebook and Alibaba,” said Anshul Jain, a partner handling deals, tax & regulatory practice at consulting firm PricewaterhouseCoopers.
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