Sebi eases eligibility requirement related to superior voting rights shares

Markets regulator Sebi on Tuesday decided to relax the framework governing the issue of shares with superior voting rights (SR shares), a move that will help new-age technology companies.

The Securities and Exchange Board of India (Sebi) said promoters who have a net worth of over Rs 1,000 crore can have superior voting rights in their companies, raising it from the current Rs 500 crore.

In addition, the minimum gap between issuance of SR shares and filing of 'Red Herring Prospectus' has been reduced to three months from the existing requirement of six months.

Market participants are of the view that certain aspects of current framework on SR shares are onerous which delays such issuer companies from raising funds from capital markets.

The regulator had introduced superior voting rights framework in 2019 specifically for issuer companies intensive in use of technology. The framework allows issuance of SR shares to promoters/ founders holding executive position in the company desirous of listing on the main board.

It also has checks and balances such as coat tail provisions i.e. matters in which SR shares will have the same rights as that of ordinary shares and sunset clause i.e. time period until which such an SR shareholder will enjoy superior voting rights.

Under the current rule, an SR shareholder should not be part of promoter group having net worth more than Rs 500 crore. "This has been changed to require that the SR shareholder, as an individual, should not have net worth of more than Rs 1,000 crore," Sebi said.