In a landmark reform aimed at supporting innovation-driven enterprises, the Securities and Exchange Board of India (SEBI) has approved the introduction of a Dual-Class Share (DCS) mechanism for eligible public limited startups. Effective from September 1, 2026, this framework will allow founders to retain superior voting rights (SVRs) while raising capital through public markets, a move intended to protect the strategic vision of promoters in high-growth sectors such as technology, biotech, fintech, and AI. This brings India in line with global startup hubs like the U.S. and Singapore, where dual-class structures are already prevalent.

Under the new mechanism, startups that meet SEBI’s criteria—such as being incorporated for at least three years, having positive revenue growth for two consecutive financial years, and holding a net worth below ₹500 crore—can issue superior voting shares with up to 10:1 voting power compared to ordinary shares. These SVRs must be issued only to promoters or founders before IPO, and cannot be transferred or pledged. Post-listing, the companies must disclose all DCS-related details in their offer documents, and SEBI has mandated a sunset clause of five years, subject to renewal via shareholder approval through a special resolution.

To ensure governance integrity, SEBI has imposed strict restrictions on the use of SVRs for decisions related to mergers, significant asset sales, changes in corporate structure, or amendments to the DCS framework, which must be approved on an equal-voting basis by ordinary shareholders. Companies using the DCS model must also appoint at least 50% independent directors and file enhanced corporate governance reports. Industry experts have praised this move as a bold step to retain founder control while democratizing access to capital, and predict it will drive a wave of IPOs among India’s next generation of tech unicorns.