Economy Current Affairs - 2019

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Government relaxes norms for shares with differential voting rights

Union Ministry of Corporate Affairs (MCA) has amended provisions relating to issue of shares with Differential Voting Rights (DVRs) provisions under Companies Act. This move is aimed at 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 made are

The existing cap of 26 % of total post issue paid up equity share capital raised to 74 % of total voting power in respect of shares with DVRs of a company.

The earlier requirement of distributable profits for 3 years for a company to be eligible to issue shares with DVR now has been removed.

Alongside above two changes, time period within which Employee Stock Options (ESOPs) can be issued by Startups recognized by Department for Promotion of Industry & Internal Trade (DPIIT) to promoters or Directors holding more than 10% of equity shares, has been increased from current 5 years to 10 years from date of their incorporation.

Background

Promoters/founders who are instrumental in starting up company often lose control of firm when they dilute their stakes to raise multiple rounds of funding. Differential Voting Rights do not follow common rule of one share-one vote. DVRs enable promoters to retain control over company even after many new investors come in, by allowing shares with superior voting rights or lower or fractional voting rights to public investors.

GI Tag accorded to three new products

Geographical Indications Registry under Department for Promotion of Industry and Internal Trade (DPIIT) has accorded Geographical Indication (GI) tag to Tirur betel leaf from Kerala, Tawlhlohpuan fabric and Mizo Puanchei shawl/textile from Mizoram. GI product is recognised as originating from specific geographical origin possessing qualities or reputation related to its origin. This tag is exclusive and similar item originating from different location is not allowed to use it.

Key Facts

Tirur betel Leaf (Kerala): It is mainly cultivated in Tirur, Tanur, Tirurangadi, Kuttippuram, Malappuram and Vengara block panchayaths of Malappuram District of Kerala.  It is valued both for its mild stimulant action and medicinal properties. Though it is commonly used for making pan masala for chewing, it has many medicinal, industrial and cultural usages. It is considered as a remedy for bad breath and digestive disorders.

Tawlhlohpuan (Mizoram): It is compactly woven fabric from Mizoram. It is known for warp yarns, warping, weaving and intricate designs that are made by hand. It holds high significance in Mizo society. It is produced throughout Mizoram, especially in Aizawl and Thenzawl town which are main centres of production.

Mizo Puanchei (Mizoram): It is colourful Mizo shawl considered essential by most women from State and common costume in Mizo festive dances and official ceremonies. It is made by weavers by inserting designs and motifs by using supplementary yarns while weaving to create this beautiful and alluring textile.