INDIA Law and Practice Contributed by: C R Dua, Sanjeev Kaul, Abhinav Rastogi and Ashish Malkotia, Dua Associates
• give notice to members of any resolution that may properly be moved and is intended to be moved at a meeting, and the company shall be bound to give notice of such resolution if it was deposited not less than six weeks before the meeting; and • call an EGM and set out the matters for considera- tion at the EGM so requested (see 2.3 Procedure and Criteria for Calling a General Meeting ). When special notice of a resolution is required by the Act (for example, for the removal of a director) or by the articles, it must be provided by members who hold at least 1% of the total voting power or shares with a paid-up amount of up to INR500,000. Subsequently, the company must notify its members of the proposed As a general rule, a shareholder cannot challenge a resolution that has been validly passed at a general meeting. However, shareholders do have the option to approach the jurisdictional National Company Law Tri- bunal (“Tribunal”) to contest a resolution under certain circumstances. Over time, through various decisions, the courts and the Tribunals have outlined the specific situations in which shareholders can seek the Tribu- nal’s intervention. It is important to note that not every non-compliance with company law, failure to follow required procedures, or a one-time illegality will be sufficient to warrant such intervention by the Tribunal. The Tribunal may intervene where the complainant shareholder(s) can demonstrate the following: • oppression: the affairs of the company have been or are being conducted in a manner prejudicial to public interest or the interest of the company, or in a way that is oppressive to said shareholder or any other member(s) of the company; or • mismanagement: a material change has been brought about in the management or control of the company, and the affairs of the company will likely be conducted in a manner prejudicial to its inter- ests, that of its members, or any class of members. At least 100 shareholders or one tenth of the total number of its shareholders, whichever is less, are resolution in the prescribed manner. 2.11 Challenging a Resolution Oppression and Mismanagement
needed to file a complaint with the Tribunal. Addition- ally, any single member or group of members holding at least 10% of the company’s issued share capital can also bring a complaint. However, the Tribunal has the discretion to waive this requirement so that mem- bers can file their complaint. It is important to note that there is no threshold for a shareholder who chooses to approach a civil court, though such courts typically do not handle these matters. Class Action Suit Under the Act, a specified number of members can approach the Tribunal if they believe that the man- agement and conduct of the company’s affairs are prejudicial to the company’s or its members’ interests. They may seek an appropriate order from the Tribunal to declare void a resolution that alters the company’s memorandum or articles, especially if that resolution was passed by suppressing important facts or pro- viding misleading information to the members. Addi- tionally, the Tribunal can restrain the company and its directors from acting on such a resolution. While a few class action suits have been filed in India, the remedy remains relatively unexplored. 2.12 Institutional Shareholder Groups As a flourishing economy, India has attracted large investments from international investors and financial institutions. Institutional investors and large share- holder groups keep a close watch on their portfolio companies, including their progress, performance and public disclosures made from time to time. Institutional investors and other shareholder groups actively use the rights attached to their sharehold- ings, such as voting during general meetings. The involvement of investors and shareholder groups in discussing matters to be transacted by the company in a meeting also influences the public shareholders. Institutional investors engage in dialogue with com- pany management and boards of directors with inputs on strengthening the corporate governance prac- tices and protection of investor rights and interests. By leveraging their shareholding and influence, they also advocate for transparency, accountability and sustainable practices to be adopted by the company. They also help in ensuring that the company aligns its
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