SEBI's amendment of regulations to prohibit companies from issuing fresh shares with superior rights vis a vis the rights of existing shareholders seems to have been taken in the light of experiences abroad. In a market where there are few cases of stocks with differential voting rights (DVRs), last week's change to the Equity Listing Agreement, at first glance, seems to protect the interests of minority shareholders. SEBI's step is ostensibly to prevent situations wherein companies come out with follow-on-issues, rights issues or preferential allotments with higher voting rights per share, helping promoters get greater control in the company. Though a rarity in India, there are many examples abroad such as the Ford family, which controls 40 per cent of shareholder votes with only about 4 per cent of the equity in Ford Motors. The dual-class stock structure has worked for many including Warren Buffett, a majority shareholder of Berkshire Hathaway, which offers Class-B shares with 1/200th of the voting rights of a Class A share. Google, at the time of going public, reserved Class-B shares with 10 votes a share for insiders and sold Class-A shares with one vote to the public, helping retain control with select shareholders.
