In a progressive stance and big boon for India’s maturing tech startups, country’s stock market regulator SEBI on Thursday, approved a framework for issue differential voting rights (DVRs) in tech startups.

Dual-class share structures and DVRs are common in the United States and China. In fact, some of the most known tech founders, including Facebook’s Mark Zuckerberg, Alibaba Group’s Jack Ma and Under Armour’s Kevin Plank, among others, have adopted DVR structures.

These DVR structures provide founders of the companies, much greater control over their companies, even if their shareholding is diluted. This holds high importance in cases like those of India’s unicorns, since founders are left little to no equity due to multiple dilutions and billions of dollars in fund-raise. With DVRs inplace, these founders, despite limited shareholding, could exercise greater control over the company.

Founders of some of India’s biggest tech startups have voiced unequivocal support to the recent SEBI announcement. Bhavish Aggarwal of Ola, along with MakeMyTrip founder Deep Kalra and Flipkart founder Sachin Bansal, have been the prime backers of India-Tech, an advocacy group that has been lobbying with the government on various issues, including DVRs.

These DVRs will also in turn help the economy as a whole. With DVRs in place, country’s startups would prefer to list locally on Indian stock exchanges, rather than going in for much preferred NASDAQ or Singapore exchange.

In a tweet about the same, Ola’s Aggarwal said, “[I] welcome Sebi’s move to allow Differential Voting Rights for Indian tech companies. I’m certain this will encourage Indian companies to list within the country, backed by our own people. Made in India businesses and entrepreneurs can control their destiny and build for the world!”

While much of India’s tech and startup community hails SEBI’s nod to DVRs, there is still a lot of clarity needed on the sunset clause for such dual-class shareholding and the net worth limit for shareholders with superior voting rights.

According to an ET report, experts and stakeholders had suggested earlier that DVRs should be restricted only to new technology firms that have yet to get listed and are in the areas of IT, IPR, data analytics, bio-technology or nano-technology. Also, shareholders with superior rights should be a part of promoter groups having a collective net worth of not more than Rs 500 crore.

Besides, such shares need to be held for at least six months before filing of the IPO papers. There would also be a sunset clause, a thorny issue for India’s major tech startups that have lobbied against the five-year period mandated thus far.

The sunset clause specifies how many years differential voting rights will prevail after a company is listed.

IndiaTech has proposed a sunset period of at least 15 years, which could be extended by another five, with shareholder approval.

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