MCA
amends provisions related to Differential Voting Rights under Companies Act
PIB dated 16.08.2019
The Ministry of Corporate Affairs has amended the
provisions relating to issue of shares with Differential Voting Rights (DVRs)
provisions under the Companies Act.
Objective:
Enabling
promoters of Indian companies to retain control of their companies in their
pursuit for growth and creation of long-term value for shareholders, even as
they raise equity capital from global investors.
Key Changes:
1) Amendments
to the Companies (Share Capital & Debentures) Rules brings in an
enhancement in the previously existing cap of 26% of the total post issue paid
up equity share capital to a revised cap of 74% of total voting power in
respect of shares with Differential Voting Rights of a company.
2) Removal of
the earlier requirement of distributable profits for 3 years for a company to
be eligible to issue shares with Differential Voting Rights.
Reasons for taking the above two initiatives:
a) Initiatives
taken in response to requests from innovative tech companies & startups and
b) to
strengthen the hands of Indian companies and their promoters who have lately
been identified by deep-pocketed investors worldwide for the acquisition of
controlling stake in them to gain access to the cutting edge innovation and
technology development being undertaken by them.
c) The Government had noted that such Indian promoters
have had to cede control of companies which have prospects of becoming
Unicorns, due to the requirements of raising capital through the issue of equity to
foreign investors.
Alongside
the above two changes,
another major
step taken is that the time period within which Employee Stock Options (ESOPs)
can be issued by Startups recognized by the Department for Promotion of Industry
& Internal Trade (DPIIT) to promoters or Directors holding more than 10% of
equity shares, has been enhanced from 5 years to 10 years from the date of
their incorporation.
Voluntary Liquidation of Company & LLP
ReplyDeleteVoluntary Liquidation of a Company and LLP is governed by the provisions of Section 59 of Insolvency and Bankruptcy Code, 2016 (“IBC”). Under IBC, 2016, a solvent Company or LLP who do not have committed a default of debt and solvent to pay off its full debts can opt to liquidate voluntarily after fulfilling the conditions specified under Insolvency and Bankruptcy Code, 2016 and following the process under IBBI (Voluntary Liquidation process) Regulations, 2017.
https://companiesinn.com/articles/voluntary-liquidation-of-company-and-llp-under-insolvency-and-bankruptcy-code-2016