Policy Wrap: SEBI norms for startups to issue DVRs; RBI clarifies data storage rules

This week, the capital market regulator allowed initial public offerings (IPOs) for tech firms that have issued shares with superior voting rights to promoters and/or founders, subject to conditions. The IPO will be only of shares with ordinary voting rights and the special shares can list after five years, upon conversion into regular equity.

Shares with superior voting rights or differential voting rights (DVRs) help founders exercise control over the company. 

The policy move results from a consultation paper floated by the capital market regulator in March. Founders of Indian companies such as ride-hailing app Ola and MakeMyTrip have been vocal about protecting the rights of founders in growth-stage companies through shares with DVRs. Global companies like Facebook and Lyft have structured DVR shares into their shareholding.

Data localisation

More than a year after the Reserve Bank of India mandated that all payment system operators (PSOs) should store payments-related data of Indian citizens within the nation, the RBI clarified this week that data can be processed abroad but should be deleted from the overseas systems within 24 hours of compute.

The April 2018 regulations were expected to affect the operations of Mastercard, American Express, Amazon, Facebook, and Microsoft.

The central bank also clarified that the rules will cover all banks.

Startup India

The Startup India Initiative of the government has seen 19,351 startups registered with the Department for Promotion of Industry and Internal Trade (DPIIT), said minister of commerce and industry Piyush Goyal. Most of the startups were from Maharashtra, followed by Karnataka and Delhi. Uttar Pradesh was a distant fourth, followed by Telangana.

The minister added that 26 states in total have formulated startup policies.

Moreover, as the operating agency for the Rs 10,000 crore Fund of Funds for startups, Small Industries Development Bank of India has been able to commit around Rs 3,123 crore to 49 alternative investment firms registered with the capital markets regulator. The fund will be deployed till 2025.