MCA amends provisions related to Differential Voting Rights under Companies Act. Download Notification

MCA amends provisions related to Differential Voting Rights under Companies Act. Amendment made to Companies (Share Capital and Debentures) Rules, 2014

The Companies (Share Capital and Debentures) Amendment Rules 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 with the objective of 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.

The key change brought about through the 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.

Another key change brought about is the removal of the earlier requirement of distributable profits for 3 years for a company to be eligible to issue shares with Differential Voting Rights.

The above two initiatives have been taken by the Government in response to requests from innovative tech companies & startups and to strengthen the hands of Indian companies and their promoters who have lately been identified by deep pocketed investors worldwide for acquisition of controlling stake in them to gain access to the cutting edge innovation and technology development being undertaken by them.

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 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.

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• Refusing to condone delay can result in a meritorious matter thrown out at threshold
• Prior period income cannot be considered as income of the current year
• SC condoned delay of 972 days in filing appeal due to restructuring in Department
• No addition on mere valuation report when stamp duty valuation is available
• ITAT deleted penalty for making a wrong claim of deduction u/s 54F/54B

addition u/s 68 addition u/s 69A ca misconduct cash deposit in bank cbdt circular CBDT Instruction cbdt notification cbdt order cbdt press release cgst circular cgst notification cit revision 263 concealment penalty condonation of delay covid-19 custom circular demonetisation due date extension e-way bill faq GST circular GST Council Meeting gst faq gstn advisory GSTR-3B GST rates IBBI ibc income tax prosecution itat ITAT Delhi mca circular MCA notification order u/s 119 penalty 271(1)(c) penalty u/s 271(1)(c) Press Release reasons recorded reopening 148 Reopening us 147 Search & Seizure sebi circular unexplained cash credits validity of notice u/s 148 Withdrawal of 2000 500 Bank Notes