[Pammy Jaiswal is a Partner and Shraddha Shivani an Executive at Vinod Kothari and Company] Section 8 of the Companies Act, 2013 provides for the formation of companies with specific objects. The profits earned by such companies necessarily get redeployed to pursue the very same objects for which the company is formed and cannot be distributed to the shareholders. There are several restraints to...
Ratification of Director’s Breach of Duty: Opportunity to Evade Liability?
[Arjun Tyagi is a fourth year B.A., LL.B. (Hons.) student at National Law University Odisha.] Directors of companies owe fiduciary and ‘statutory’ (section 166 of the Companies Act 2013) duties to the company, its employees and the shareholders. Common law principles provide ratification of breach of duty by directors, if the shareholders pass a resolution agreeing to absolve directors from...
Covid-19 and Company Law: The Impact of Digitalisation
[Dharini Shanker is a 1st Year LL.B student at Campus Law Centre, University of Delhi] The Company Law Committee (“Committee”), set up to make recommendations to the Government for reforms directed at promoting greater ease of business in India and the effective implementation of the Companies Act, 2013 (“Act”), the LLP Act, 2008 and the Rules made thereunder, has submitted its report in March...
Applicability of Significant Beneficial Owner Provisions to Limited Liability Partnerships
[Gaurav Pingle is practising company secretary and can be reached at [email protected]] With an intention to regulate limited liability partnerships (‘LLPs’) more stringently, the Ministry of Corporate Affairs (‘MCA’) issued a notification dated February 11, 2022 (‘MCA Notification’) whereby certain provisions of the Companies Act, 2013 are now applicable to LLPs. The said amendment falls...
Should India Allow Fractional Share Investing?
[Ajith Kidambi is a V year student at the NALSAR University of Law, Hyderabad] Fractional share investing could finally be a reality in the Indian stock market. The Company Law Committee, which the Ministry of Corporate Affairs constituted in 2019, had released its third report in April 2022, making several recommendations to the government to improve the ease of doing business in India and...
Zee v. Invesco: Jurisdiction Battle between the High Court and the NCLT
[Neharika Chhabra and Gourav Kathuria are fourth-year B.A. LL.B (Hons.) students at NALSAR University of Law] On 22 March 2022, a division bench of the Bombay High Court in Invesco Developing Markets Fund v. Zee Entertainment Enterprises overturned the judgment of a single judge. It held that section 430 of the Companies Act (the ‘Act’) bars the High Court from adjudicating matters arising under...
The Dichotomy of Special Courts: Contrasting the Companies Act and the IBC
[Rhythm Buaria and Payal Chandra are advocates practicing before courts and tribunals in Delhi] Recently, a Single Judge of the Bombay High Court concluded, in Satyanarayan Bankatlal Malu v. Insolvency and Bankruptcy Board of India, that offences under the Insolvency and Bankruptcy Code, 2016 (“IBC”) can only be tried by the Metropolitan Magistrate or Judicial Magistrate First Class exercising...
Widening Chasm between Director Remuneration & ESG Investment in India
[Divyanshu Sharma is a 3rd Year BA LLB (Hons.) student at National Law University, Delhi] The debate regarding the disparity in director remuneration between professional and promoter-group directors has been reignited in a recent study conducted by Institutional Investor Advisory Services. The study has unearthed numerous instances wherein the remuneration granted to promoter CEOs in India is 50...
New Materiality Threshold for RPTs: Nagging Questions on Shareholder Approval
[Vinita Nair and Sikha Bansal are Partners at Vinod Kothari & Company, Practicing Company Secretaries] Related party transactions (RPTs) are perceived as potential tools for unjust enrichment of those in a fiduciary capacity. Hence, SEBI has recently revamped RPT norms (most of which are to take effect from 1 April 2022) intending to impose a greater scrutiny on RPTs. With the above, all...
A Comment on a Delhi High Court Ruling on Shareholder Derivative Actions
One of the age-old tenets of corporate law is the “proper plaintiff” rule laid down in the seminal case of Foss v Harbottle, (1843) 2 Hare 461. According to this rule, where a wrong has been done to a company, it is only the company and not an individual shareholder who may bring an action to seek redress. This represents a wholesome recognition of the separate legal personality of the company...
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