INDIA Law and Practice Contributed by: Raj Ramachandran and Krutamana Pisipati, JSA
11.3 Board’s Role The board is required to act in a fiduciary capac- ity in the interests of the company. It is not com- mon to have shareholder litigation challenging the board’s decision to recommend a merger or acquisition transaction, particularly where the companies are promoter driven and the inter- ests of minority shareholders are not prejudicially affected by the transaction. Shareholder litigation would arise where minority shareholders consider the transaction value to be inadequate including where there is a conflict of interest or related parties involved, or where there are disproportionate terms and economic benefits to the various stakeholders involved. A buyer should ensure that the transaction struc- ture is clear, duly disclosed, and the considera- tion paid to the various stakeholders is propor- tionate to their shareholding.
11.4 Independent Outside Advice In promoter driven companies in India, there is typically an overlap of board and shareholder interests. However, where there are specific con- siderations and provisions governing directors independent of the company, directors do seek independent advice. A financial advisor typically provides a holistic opinion on the transaction and the board often resigns following the change in ownership of the company.
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