Institutional investors have begun taking an active role in companies that have dispersed shareholding. This played out demonstrably in the case of HDFC in July when the chairman Mr. Deepak Parekh retained his position in the company by a narrow margin. This was attributable to a number of foreign institutional investors having voted against his continuation in the company. They did so on the...
The Tata Corporate Governance Episode: The ‘India-Specific’ Issues and Concerns
[Guest post by Priya Garg, a 4th year law-student at West Bengal National University of Juridical Sciences (WBNUJS)] Introduction The recent turf battle within the Tata Group is likely to become a subject matter of study for various disciplines, including the subject of corporate law and governance.[1] The Tata-Mistry dispute giving rise to corporate governance issues needs to be considered...
Arbitrability of Oppression and Mismanagement in India
[Guest post by Aishwarya Singh, 5th year student at Jindal Global Law School] Background Sections 241 and 242 of the Companies Act, 2013 (“CA, 2013”) provide the National Company Law Tribunal (“NCLT”) the present day authority to deal with the petitions pertaining to oppression and mismanagement. Under the previous Companies Act, 1956 (“CA, 1956”), this power was exercised by the Company Law...
Activism through Directors Elected by “Small Shareholders”
Recent news reports (here, here and here) have highlighted a shareholder proposal that has been initiated in preparation for the annual general meeting of Alembic Limited to be held on 28 July 2017. The shareholder in question is Unifi Capital Private Limited who is said (though not verified) to be holding 3% shares in Alembic. The proposal involves the election of a “small shareholder” director...
Shareholding Thresholds for Oppression and Class Actions
The Tata-Mistry episode has brought into focus the minimum shareholding threshold required for a minority shareholder to bring an action for oppression and mismanagement under sections 241 to 244 of the Companies Act, 2013. In a piece in Bloomberg Quint titled Minority Shareholder Protection as a Numbers Game, I examine the implications of such shareholding thresholds that operate as a filter...
NCLT Rules on Maintainability in the Tata-Mistry Case
Background The action on the legal front in the Tata-Mistry episode has been playing out in the National Company Law Tribunal (NCLT) over the last few weeks. This is on account of an action for oppression and mismanagement initiated by two Mistry companies (the Mistry Group) that are shareholders of Tata Sons against the company as well as its directors and officers. The action was brought under...
Shareholder Primacy in India: So Near and Yet So Far!
[The following guest post is contributed by Professor Bala N. Balasubramanian, who is an Adjunct Professor at the Indian Institute of Management, Ahmedabad.][1] The scholarly debate on primacy among the shareholders, boards and the executive in corporate governance is intellectually as challenging as it is yet inconclusive, although more recent trends around the world would seem to suggest at...
The Tata Episode: Corporate Governance and the Continuing Influence of Promoters
It is generally understood that corporate governance norms ought to address agency problems between various actors in a company. Moreover, in companies with concentrated shareholding, the agency problems between controlling shareholders (referred to in India as “promoters”) and minority shareholders tend to be rampant, and hence corporate governance measures need to be targeted to address that...
Non-compete Fee: A Bane for Minority Shareholders
[The following post is contributed by Soham Roy & Akhil Nene, who are 5th year students at the National Law University Odisha] A non-compete fee is paid to exiting promoters or founders of a company to ensure that they do not compete for a certain period of time with the company they are exiting. Recently, there was considerable controversy surrounding the HDFC Life-Max merger as a result of...
Ruling on Shareholder Rights to Inspect Company Records
[The following guest post is contributed by Dheeraj Kumar Sharma, who is a Manager at Vinod Kothari & Company] Introduction The Mumbai Bench of the Company Law Board (‘CLB’), through its order dated April 16, 2015 in the case of Mr. Anil Kumar Poddar v. Bonanza Industries Limited, dismissed the application of a shareholder who demanded copies of records of a company and sought inspection of...
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