SEBI relaxes eligibility norms for issue of shares with 'superior voting rights'

Mumbai, Sep 28 The Securities and Exchange Board of India (SEBI) has relaxed eligibility requirements related to Superior Voting Rights (SR) shares framework that will allow give more flexibility to the founders of new-age companies when it comes to raising capital and taking their company public.

As per the relaxed norms, the net worth condition of SR shareholders has been changed to include an individual whose net worth is not more than Rs 1,000 crore.

Under the regulations prevalent till now, SR shares could be issued only to founders who are not part of any promoter group and whose collective net worth is Rs 500 crore.

The market regulator, at its board meeting on Tuesday, also approved reduction in the minimum gap between issuance of SR shares and filing of Red Herring Prospectus to 3 months from the existing requirement of 6 months.

This change has been made based on the feedback from market participants who felt that the requirement of six months is onerous as it delays raising funds from the capital market.

The SEBI had introduced SR framework in 2019, specifically for issuer companies intensive in use of technology. The framework allowed issuance of SR shares to promoters/ founders holding executive position in the company desirous of listing on the Main Board. The framework also included checks and balances, such as 'coat tail' provisions - i.e. matters in which SR shares shall have the same rights as that of ordinary shares, and sunset clause i.e. time period until which such an SR shareholder shall enjoy superior voting rights.

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