INDIA Law and Practice Contributed by: Anand Lakra, Shivpriya Nanda, Zain Pandit and Ami Shah, JSA Advocates & Solicitors
11.3 Interference With Completion It is not common for activists to seek to inter - fere with the completion of the announced trans - actions. Shareholders can however exercise their rights where the regulations themselves seek approval from minority shareholders. For instance, in the case of listed companies desir - ous of disposing off their undertaking is required to take prior approval of its shareholders by way of a special resolution wherein the votes cast by the public shareholders in favour of the transac - tion should exceed the votes cast against the transaction. A similar approval requirement is also applicable when a promoter is trying to take a company private under the Indian delisting reg - ulations. All related-party transactions require an ordinary shareholder approval where the related parties are not permitted to vote. Accordingly, the shareholders can use their votes in such a manner, so as to ensure that the transactions undertaken by the listed company are not det - rimental to the minority. However, shareholders and activists have little say in secondary share sale transactions.
2024, in particular, has seen a number of cases of shareholder activism. In the case of Jindal Polyfilms, minority share - holders filed class action proceedings against Jindal Polyfilms and its board, alleging financial mismanagement and the sale of undervalued assets to promoter-related entities. Another development in shareholder activism is the rise of proxy advisory firms. Regulated by SEBI, these independent organisations provide research, analysis and recommendations to institutional shareholders on corporate govern - ance matters, enabling them to make informed voting decisions. Proxy advisory firms often hold companies to governance standards that exceed legal require - ments, aligning them with global best practices. Over time, their influence has grown among insti - tutional investors, encouraging greater transpar - ency and improved corporate governance within companies. 11.2 Aims of Activists Shareholder activism is not very common in India. However, institutional investors try their best to encourage companies to undertake transactions in the best interests of all stake - holders. The institutional investors do exercise their votes based on the recommendations of the proxy advisors, to prevent transactions which, in their view, are not in the best interests of the stakeholders.
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