A foreign strategic investor held board seats in an Indian company under a shareholders' agreement signed in 2011. At the IPO in 2023, the agreement was terminated almost entirely; the two rights that survived required shareholder approval after listing. Under Regulation 31B of SEBI's Listing Regulations, that approval now lapses every five years unless renewed by special resolution. In May 2026, Swiggy's proposed founder-linked board rights failed at 72.36 percent against a 75 percent threshold. Why does India convert privately negotiated rights into recurring elections, and what does a special right now cost to keep?
A special right is the standard currency of private capital in India. When a fund or a strategic investor writes a cheque into a private company, it negotiates rights along with shares: a seat on the board, a veto on big decisions, a guaranteed flow of information. These rights are paid for. An investor who gets governance pays a different price than an investor who buys a silent stake. And as long as the company stays private, the rights work the way any contract works. They bind the people who signed, and they last as long as the agreement lasts.
A listing changes all of this, in two stages.
The first stage happens at the IPO itself. The Securities and Exchange Board of India (SEBI) does not allow the private company's rights structure to travel into the public company. When the company files its updated draft red herring prospectus, the offer document for the IPO, the shareholders' agreement is terminated and the special rights in the company's Articles of Association are deleted. If any right is to survive, it must be specifically carved out, and then approved by the shareholders of the listed company after listing. The instrument through which all this happens is a document most people never read, though every IPO produces one: the waiver-cum-amendment agreement, in which the investors agree to switch off their own contract so that the company can list.
The documented case sits in the public record of DOMS Industries Limited, the listed Indian stationery maker. Its foreign partner, F.I.L.A., Fabbrica Italiana Lapis ed Affini S.p.A., the Milan-listed Italian stationery group, first signed a shareholders' agreement with the Indian promoter family in 2011, and updated it in 2015. In August 2023, to make the IPO possible, the parties signed a waiver-cum-amendment agreement. From the filing of the updated offer document, everything in the old agreements was terminated except two rights: each side's right to nominate directors, and each side's right to receive information from the company. Even these two did not carry over on their own. They were put to a vote of the listed company's shareholders and approved in May 2024, five months after listing. Twelve years of negotiated governance came down to two rights, and those two rights now exist because public shareholders, people who never signed the contract, voted to allow them. The listing does not carry the private bargain into the public company; it cancels the bargain, and the surviving rights must apply for readmission.
The second stage is what happens to the survivors, and this is where the rules changed in 2023. Regulation 31B of SEBI's Listing Regulations says that any special right held by a shareholder of a listed company must be approved by the shareholders through a special resolution, which needs seventy-five percent of the votes cast, once every five years. SEBI's reasoning was straightforward. Shareholders' agreements were being written so that special rights survived even after the holder's stake had shrunk to a fraction of what it was. A right that outlives the shareholding behind it becomes a permanent privilege, and SEBI's view was that rights should be proportional to holding. The rule has narrow exceptions, mainly for lenders regulated by the Reserve Bank of India and for debenture trustees. The commercial rights of investors and promoters get no exception. Rights that already existed when the rule arrived must be put to a vote by 2028, and most companies have so far chosen to wait. A companion rule from the same year required listed companies to disclose these agreements publicly, which is why executed shareholders' agreements now sit on company websites for anyone to read.
The consequence of the five-year cycle is simple to state. A special right in a listed Indian company is no longer a term that was negotiated once; it is a term that must keep winning a seventy-five percent vote. And the people voting are not the people who were on the cap table when the right was priced. They are whoever holds the shares on the day of the vote: mutual funds, foreign portfolio investors guided by proxy advisory firms, insurance companies, and retail investors who arrived after the IPO. Before the listing, the counterparty to a special right is the company that signed; after the listing, it is whoever holds the register every fifth year.
In May 2026 the country saw what this means when a vote is actually contested. Swiggy, a listed company with no identified promoter group, asked its shareholders to amend its Articles of Association to create board nomination rights for its founders and senior management: a right for the Group Chief Executive Officer and co-founder, Sriharsha Majety, to nominate one senior management professional to the board, and a right for co-founder Phani Kishan Addepalli that lasts only while he holds his position. The rights carried no veto and no permanent seat; every nomination still had to pass the Nomination and Remuneration Committee, the board, and the shareholders. The voting results, disclosed on 21 May 2026, showed 72.36 percent in favour. The threshold was 75. The resolution failed by 2.64 percent, and the rights never came into existence.
The reason Swiggy gave makes the episode larger than a governance story. The company said the amendments were preparatory steps toward qualifying as an Indian Owned and Controlled Company under the foreign exchange rules. That classification depends on who controls the company, and for an e-commerce business it decides something very practical: whether the business may own the inventory it sells, or must remain a marketplace for other sellers. So the vote was an attempt to settle the company's regulatory character through its Articles, and the shareholders withheld consent by a margin smaller than the holding of a single large institution. Swiggy's disclosure after the vote pointed out, correctly, that no law requires a minimum shareholding for a nomination right and that the rights were narrowly drawn. The resolution still failed. The vote was never a test of legality. It was a test of consent.
For a fund, a family office, or a strategic investor, the practical reading runs in order. A right negotiated in a private company now has an expiry logic the term sheet never mentions: if the company lists, the right is cancelled at the offer document, survives only if carved out and ratified, and then faces an election every five years that the holder cannot win alone. The economics follow. A board seat that is certain while the company is private, and conditional on a public vote afterwards, is really two different rights, and paying the same price for both is a mistake. So is relying on contract language alone. The investor who plans to hold through a listing is better served by things a listing cannot cancel: a shareholding large enough to matter, relationships with the institutions that will vote, and a credible record with the proxy advisory firms. And when entering an already-listed company, the diligence question is not only what special rights exist, but when they were last approved, because a right approaching its five-year vote in a company with scattered shareholding carries an expiry risk.
The deeper observation is about what a listing now is. India has always treated the IPO as a disclosure event and a pricing event. The 2023 rules made it something more: the moment when private arrangements between known parties give way to the continuing consent of an anonymous and changing public register. The rule does not say a special right cannot exist in a listed company; it says the right exists at the pleasure of the register, renewed every five years or not at all. The investor who assumes that listing makes the contract stronger, because the company is now regulated, has the direction of the change exactly backwards. The contract becomes weaker. The register becomes the counterparty. And the five-year calendar, not the agreement, decides how long the bargain lasts.