Topic:Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
4) What are Differential Voting Rights? Discuss the role played by them in the growth and expansion of start-up ecosystem in India.(250 words)
Why this question:
The article talks about the concept of DVRs and applicability to start-ups.
Key demand of the question:
The answer must discuss the significance of DVRs and their role in promoting start-ups.
Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.
Structure of the answer:
Describe what are DVRs.
Discuss the concept of DVR – A DVR share is like an ordinary equity share, but it provides fewer voting rights to the shareholder.
Why do companies issue DVR? – Companies issue DVR shares for prevention of a hostile takeover and dilution of voting rights. It also helps strategic investors who do not want control, but are looking at a reasonably big investment in a company.
At times, companies issue DVR shares to fund new large projects, due to fewer voting rights, even a big issue does not trigger an open offer.
Explain in what way they can contribute to start -ups.
Conclude with way forward.