[Rajat Maloo is a III year B.A., LL.B. (Hons.) student at the National Law School of India University, Bangalore] Common law provides that those to whom duties are owed may release those who owe the duties from their legal obligations. In the corporate law context, this principle has been applied by courts in cases where shareholders ratified directors’ breaches of duties. However, various...
Reinforcing the Corporate Governance Framework on Director Competence
[Tushar Oberoy and Rishabh Sharma are 4th year BA.LL.B. (Hons.) students at NALSAR University of Law, Hyderabad] A director of a company has manifold duties and responsibilities that include ensuring that the interests of all shareholders are protected and that healthy management practices are put in place. For effective fulfillment of these responsibilities, a competent director becomes an...
Delhi High Court Rules on Disqualification of Directors
In order to address the scores of shell companies in existence, the Ministry of Corporate Affairs (MCA) introduced a range of measures in the wake of the 2017 demonetization exercise. One of them pertains to the disqualification of directors in companies that have failed to file financial statements or annual returns for a continuous period of three financial years, as prescribed under section...
Qualifying test requirements for Independent Directors – a hasty, slipshod & cumbersome requirement
I have written a piece for Moneylife on the new requirements of the Ministry of Corporate Affairs for independent directors that mandate existing as well as first-time independent directors to enrol in a databank as also pass certain qualifying test. The Rules, that are spread over several notifications and also an FAQ, come into force from 1st December 2019 and some transition period is also...
Director Liability: Nexus with Role and not Position
[Pammy Jaiswal is a Partner at Vinod Kothari and Company, and can be reached at [email protected]] While there have been an increasing number of rulings on the liability of directors, the question that mostly came up for examination related to their involvement in the day-to-day operations of the company. The liability of non-executive directors has mostly been scanned to evaluate their...
Shareholding Patterns and Director’s Duty of Loyalty: Comparative Analysis of India and the US
[Ishani Mookherjee is a 3rd year B.A. LLB (Hons.) student at Jindal Global Law School] The Delaware Supreme Court, in Cede v. Technicolor Inc., examined the applicability of the business judgment rule in the United States (US). For a business decision to be protected by this rule, two conditions have to be satisfied – the duty of loyalty and the duty of reasonable care. This creates a...
The (Ambiguous) Position of Chairman Emeritus in Corporate Governance
[Priya Garg is a 5th year student at West Bengal National University of Juridical Sciences (WBNUJS), Kolkata] When Ratan Tata, the then Chairman Emeritus of the Tata Group of companies, allegedly exercised his influence over the Group’s directors to dethrone its then Chairman, Cyrus Mistry, because of the former’s dissatisfaction with the latter’s functioning,[1] a new corporate governance issue...
Law on Corporate Opportunity: India at Crossroads
[Angad Singh Makkar is a 4th year BA LLB (Hons.) student at Jindal Global Law School in Sonipat, Haryana] The equitable rule of corporate opportunity, which aims to balance the fiduciary duty owed by a director to the company and the director’s serving of individual entrepreneurial interests, has been varyingly applied across several jurisdictions. Most notably, while the courts in the United...
Calcutta High Court Allows Trial Against Directors of a Mutual Fund Trustee Company
It is well-known that directors of a mutual fund trustee company carry onerous responsibilities, both under the Companies Act, 2013 as well as the SEBI (Mutual Funds) Regulations, 1996. The trustee company of a mutual fund and its directors are responsible for ensuring that transactions carried out by the fund are in accordance with the relevant regulations. This is despite the fact that the day...
Madras High Court Grants Reprieve to Disqualified Directors
The Madras High Court in Bhagavan Das Dhananjay Das v. Union of India (decided on 3 August 2018 and accessible via Judis) struck down the order of the Registrar of Companies, Chennai (“RoC) which had disqualified a number of directors from their position in various companies. The Court was considering a large group of writ petitions that various disqualified directors had filed before it. In...
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