Industry bodies representing Indian start-ups have welcomed the Securities and Exchange Board of India(SEBI) decision to relax the eligibility requirements related to superior voting rights (SR) framework.


In a recent board meeting, SEBI has changed the net worth threshold for a promoter to hold superior voting rights (SR). The regulatory body has decided that the SR shareholder (as an individual) should not have net worth more than ₹1000 crore. Earlier, the SR shareholder was required to not be part of a promoter group having net worth more than ₹500 crore. Further, SEBI also reduced the minimum gap between issuance of superior voting rights shares and filing DRHP to three months from the existing requirement of six months.

Founders of most high-growth tech companies tend to dilute a majority of their shareholding because of multiple rounds of funding and new investors joining the board. With superior voting rights, these founders can retain their decision-making power in the company even if they have a significantly diluted shareholding.

The earlier net worth requirement of ₹500 crore to hold superior voting rights was a barrier for many founders who would have exceeded the threshold because of their investments in other companies or having founded another company in the past.

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Commenting on the development, Rameesh Kailasam of representing start-ups like Ola, Hike, Nykaa among others, said “IndiaTech welcomes SEBI’s decisions to relax certain requirements and thresholds with respect to SR shares. While we have been pushing for relaxations as well as SR share conditions over the past 2 years, the recent decisions grant further relaxations in the directions towards making these a reality. ”

He added that the net worth clause should ideally not be applicable to any first-time entrepreneurs and who have never been listed before. SR shareholders in High Growth Technology Companies (HGTCs) may have founded another start-up or may have invested which would have grown to breach such thresholds in value and should be ideally excluded while computing the collective net worth, he said.

Further, commenting on the development, Sijo Kuruvilla George, Executive Director: Alliance of Digital India Foundation which represents over 250 start-ups including Paytm, SHEROES, TrulyMadly among others, said, “Effective differential voting rights – or the lack of it – was one of the key limiting factors that made start-ups consider listing abroad as opposed to doing so in India. The development is a major step forward on the ease of doing business index and will enhance the attractiveness of listing in India.”

He added that progressive policymaking such as this one will bring our business environment on par with international alternatives and move us further on the path of being among the best start-up ecosystems in the world.