Beruflich Dokumente
Kultur Dokumente
Submitted To:
Assistant Prof. Kamaljeet Singh
Submitted By:
Shivani Jaiswal
B.B.A.LL.B (Hons.) VIII Semester
MATS University
MATS Law School, Raipur
ACKNOWLEDGEMENT
I express my sincere gratitude to Asst. Prof. Kamaljeet Singh , MATS Law School, Raipur,
and owe my foremost regards to him for giving me an opportunity to carry out this project work
under his guidance. This work would not have been possible without his invaluable support and
thought provoking comments. I would also like to thank my batch mates who directly or
indirectly helped me in making this project.
DISCLAIMER
This project report is authored by student of 4th year under the five year BBA.LL.B (H) Program
in MATS Law School, Raipur. The report is purely academic in nature and shall not be treated as
a legal or business advice. The views expressed in this report are personal to the student and do
not reflect the view of law school or any of its staff or personnel. All the copyrights relating to
this work are vested in the author; the same shall not be exploited without their express
permission.
Shivani Jaiswal
4th Year, MATS Law school, Raipur
TABLE OF CONTENT
INTRODUCTION.......................................................................................................... 5
RIGHTS OF SHARHOLDER........................................................................................... 6
INTRODUCTION
Some say Dont talk about rights of shareholders; the investors are eager for profits only. Few
investors attend shareholder meetings. So, time and expenses spent for shareholder meetings
should be used for other benefits.
If you have the same feeling, dont worry, you arent alone! When a company operates smoothly
and the board of directors supervises and oversees matters efficiently, most shareholders will
have trust and confidence, and will not be eager to vote. However, a proper shareholders
protection mechanism is essential to ensure the accountability of directors to shareholders, and
the effectiveness of measures for shareholders to monitor whether the board of directors and
management do their best in performing their duties. If they have poor results, leading to a share
value drop, some shareholders might, of course, step in to protect their investments, instead of
selling their shares with a loss. Respect for shareholders rights is, therefore, crucial for corporate
governance. Indeed, it is a must. But whether shareholders will exercise their rights is not an
issue that you as a Director have to be responsible for.
SHAREHOLDERS' GENERAL RIGHTS
RIGHTS OF SHARHOLDER
To require the Board of Directors to call an extraordinary general meeting in accordance with the
provisions of the Companies Act, 2013. The formal role and rights of stakeholders arise from
various sources: company law, labour law, contract law, insolvency law, etc. These rights creates
an obligation on the part of the company and the management to ensure the companys proper
compliances.
The Supreme Court of India observed By a share in a company is meant not any sum of money
but an interest measured by a sum of money and made up of diverse rights conferred on its
holders by the article of company which constitutes a contract between him and company. Thus,
it represents a Bundle of rights and obligations.1
Regarding rights of shareholders the Supreme Court in a very important case LIC of India vs.
Escorts Ltd.2at 1412 held that a shareholder has an undoubted interest in a company, an
interest which is represented by his shareholding. Share is a movable property within the
attributes of such property. The rights of shareholders are:1.
2.
To vote on the resolutions at meeting of the company. To enjoy the benefits of the
company in the shape of dividends.
3.
4.
5.
Additional director, to hold office till the date of the company's next annual general
meeting.
Alternate director, to act as an alternate for a director during his absence from India
for a period of three months or more.
Nominee director nominated by any institution under any law in force at the time or
any agreement.
Director appointed in the case of a casual vacancy in the office of any director
appointed in a general meeting in a public company.
Under the Companies Act 2013 (CA 2013), the first auditor of a company must be
appointed by its board of directors in the first board meeting of the company. Then
the auditor is appointed by the shareholders in an annual general meeting (AGM), at
the recommendation of the board of directors or audit committee. Such appointment
is made for a period of five years at a time, and is subject to ratification by way of an
ordinary resolution in every AGM.
3 http://www.icsi.edu/portals/0/APPOINTMENT%20AND%20QUALIFICATIONS.pdf
4 http://taxguru.in/company-law/appointment-auditor-companies-act-2013.html
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A casual vacancy in the auditor's office can be filled by the board of directors within
30 days of that vacancy. In case of the existing auditor's resignation, appointment of a
new auditor must be approved by the company at the general meeting within three
months of such resignation.
Removal of auditor
Under the CA 2013, a company can remove its auditor from office before the expiry
of its term by passing a special resolution, after obtaining the requisite approval from
the central government.
Drag-along right.
have the voting control of the firm, by virtue of his or her below fifty percent ownership of the
firm's equity capital
Objectives:
1. The objective of the policy is to protect the rights of the minority shareholders and keep them
updated about their rights from time to time.
2. To check that the Shareholder Relationship Committee is redressing the grievance of the
minority shareholders.
Rights of Minority Shareholders:
1. Right to appoint a director- Small shareholders, upon notice of not less than 1/10th of the total
number of such shareholders or 1000 shareholders, have a small shareholder director elected.
2. Right in decision making and such director appointed shall be considered as independent
director.
3. Oppression and mismanagement- Right to apply to tribunal by the minority shareholders,
when management or control of the company is being conducted in a manner prejudicial to the
interests of the class or company.
4. Rights with respect to reconstruction and amalgamation
valuer.
The minority have been given a right to make an offer to the majority shareholders to buy
your investment should the company be sold. Piggybacking requires that any party considering
the purchase of the business be able to buy 100 percent of the outstanding shares.
2. Provision of compulsory dividends to the minority shareholders.
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through the covenants of such a contract. Almost all major listed companies belonging to
Group A and B1 of the BSE which have sizeable debt from banks, DFIs and insurance
ii.
iii.
enforced by petitioning the civil courts, the Company Law Board or High Courts.
Creditors rights are supreme in bankruptcy restructuring or liquidation. Under the
Companies Act, 1956, the Sick Industrial Companies Act, 1985, (SICA), and the Debt
Recovery Act, 1992, creditors have the right to take a company to bankruptcy court, civil
courts, High Courts or Debt Recovery Tribunals for securing their dues either through
receivers, or via bankruptcy restructuring or winding up procedures. Under section 19 of
22 SICA, secured creditors have the right to veto any bankruptcy restructuring plan
proposed by the debtor company, and this veto right is binding. In winding up under the
Companies Act, creditors and workmen (as defined by the Industrial Disputes Act, 1947)
have pari passu rights over all other claimants to recover through asset sale their unpaid
iv.
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Creditors can, and do, petition the Company Law Board, the Board for Industrial and
Financial Reconstruction (BIFR, the special bankruptcy court under SICA), civil courts,
High Courts and Debt Recovery Tribunals for violation of their rights. This is routinely done
in instances of violation.
WORKERS AND EMPLOYEES
Workers and employees can petition civil courts and High Courts. This is regularly done in
cases of violation. However, workmen of a company are not allowed to file petition for
winding up. Workers may be allowed to appear and be heard in support or opposition of the
winding up petition.
C. Performance-enhancing mechanisms for stakeholder participation should be permitted
to develop.
ESOPs are increasingly becoming popular in companies. The Securities and Exchange Board of
India (SEBI) has prescribed a detailed guideline on the issue of share options (available under
the section on guidelines on www.sebi.gov.in). For unlisted companies, Department of Company
Affairs (DCA) has recently come out with a report on ESOP, Sweat Equity and Preferential
Allotment, which has made detailed recommendations on the subject. This report is available on
www.dca.nic.in.
D. Where stakeholders participate in the corporate governance process, they should have
access to relevant, sufficient and reliable information on a timely and regular
information. 9
All relevant communication from a listed company must be posted on the companys
website, which includes presentations to analysts. Besides, annual, half-yearly and quarterly
financial results have to be published in national newspapers, sent to the stock exchanges
and SEBI, and be posted on the website.
E. Stakeholders, including individual companies and their representative bodies, should
be able to freely communicate their concerns about illegal or unethical practices to the
board and their rights should not be compromised for doing this.
The Narayana Murthy committee has proposed that all listed companies adopt a whistle
blower policy. According to this proposed policy: Personnel who observe an unethical or
improper practice (not necessarily a violation of law) should be able to approach the audit
9 Recommendation of the Council on Principles of Corporate Governance, C(2015)84
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committee without necessarily informing their supervisors. Companies shall take measures
to ensure that this right of access is communicated to all employees through means of
internal circulars, etc. The employment and other personnel policies of the company shall
contain provisions protecting whistle blowers from unfair termination and other unfair
prejudicial employment practices.
F. The corporate governance framework should be complemented by an effective,
efficient insolvency framework and by enforcement of creditor rights10
The Sick Industrial Companies (Special Provisions) Act, 1985, popularly known as SICA,
lays down the framework for bankruptcy restructuring of financially distressed companies.
The process, which is supervised by the Board for Financial and Industrial Restructuring
(BIFR), does have its flaws and there is definite scope for improvement.
By law, creditors have prior claim over shareholders. When their contractual obligations are
not met, creditors can demand bankruptcy reorgansation under SICA, file for winding up of
the company or apply for receivership. In addition, since 1993, banks and financial
institutions can take recourse to another alternative that of filing for recovery of dues at
the Debt Recovery Tribunals (DRTs).
In an important development, the Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002, has been enacted. This Act has three important
aspects: to establish asset reconstruction companies for non-performing loans; to allow for
securitisation of loans and other securities; and to allow expeditious attachment and
foreclosure of NPLs.
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Insurance industry is governed by various Acts, Rules and Regulations framed by the
regulators and the government. Two main Laws that we shall examine to understand how
stakeholder interests are protected are11
1. Companies Law
2.
Insurance Law
The Companies Act of 2013 brings modern regulations for the corporate sector to align
with international requirements. The Act purports to deal with
a) Governance issues
b) Investor protection
c) Fraud mitigation
d) Inclusive agenda and Corporate Social Responsibility
e) Auditors and Directors accountability
f) Reporting framework and
g) Efficient restructuring
The Insurance Regulations define the obligation of insurers and intermediaries and other
related parties and lay down time-frames for compliance that cover the entire life cycle of a
product, starting from its sale to servicing, including at the point of claim to protect
stakeholders from unfair practices.
11 Stakeholder protection 26th April 2014 Under Company Law and Insurance Law, APAS advisory
service.
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CONCLUSION
Shareholders and stakeholders find common ground in the basic principles of corporate
governance. Employees can play an active role in strengthening corporate governance systems.
Empowering employees as shareholders will help to ensure that the basic principles of corporate
governance are promoted in the region. Because we are so near the end of the conference and so
full of good food and good ideas, let me distill my project into a few choice points:
Shareholders and stakeholders find common ground in the basic principles of corporate
governance. There is no real conflict between shareholders and stakeholders when it
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BIBLIOGRAPHY
LEGISLATION
Companies Act, 2013
Insurance Law
BOOKS
Avtar Singh, Company Law, 15th Edition, Eastern Book Company, Lucknow, 2013
A.K Majumdar, Company Law, Taxman Publications, 2013
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