The fiduciary duties of the directors of a company under the Companies Act, 2013 (“Act”) have been well-recognised in multiple landmark judgments, and in Section 166 of the Act. Under Section 166(3), a director is required to exercise his duties with reasonable care, skill and diligence, and exercise “independent judgement”.Continue Reading Information Rights of a Company Director- Does our company law need a relook in the post-pandemic world?
The fiduciary relationship between a director and the company is among the foremost principles of company law, which was first enshrined by common law courts of equity. The Supreme Court of India (“SC”) first recognised this common law principle in its celebrated judgment in the Nanalal Zaver case[1], which noted that directors can be considered as “trustees” of the company, and “must exercise their powers for the benefit of the company and for that alone”.[2]Continue Reading Dilemma of a Nominee Director on the JV Company’s Board – Is there a conflict in his fiduciary duties?
For a company or a large corporate group, the outcome of a single litigation can be life changing, and may severely impact the interests of the promoters, the management, investors, and other stakeholders. Given the impact that even a single litigation can have on the life of a company, the lawmakers have been conscious of the fact that time is of the utmost essence in adjudicating company disputes.Continue Reading Zee v Invesco – Has Bombay High Court created parallel jurisdiction in company law matters?
The law on minority squeeze-out has not been a glorious chapter in the history of India’s company law. The Parliament, as a matter of legislative policy, appears to be uncomfortable with enacting a law that forces minority shareholders to compulsory sell their shares. The government perceives it as a kind of ‘expropriation’. Hence, despite Dr. JJ Irani Committee’s specific recommendation, our Parliament has adopted a conservative approach while providing majority shareholders with the mechanism to ‘buyout’ the shares held by the minority shareholders. Even after the ‘right to property’ was abolished as a fundamental right under our Constitution, law makers seem uncomfortable in giving such right to majority shareholders, and half-hearted attempts have been made to provide majority shareholders with the ability to fully own a company.Continue Reading Minority squeeze-out under our Company Law – Is it a legislative policy dilemma?
After a prolonged and anxious wait, on November 9, 2021, SEBI finally notified its far-reaching amendments to the regulatory regime for Related Party Transactions (“RPT”). The amendments[1] to the RPT regulatory regime under the SEBI (LODR) Regulations, 2015 (“LODR”), have their genesis in the Report of the Working Group on RPTs (“WG Report”), which was issued by SEBI on January 27, 2020.Continue Reading Decoding SEBI’s latest amendments to the RPT regime
Ever since the notification of the Companies (Amendment) Act, 2017 (“2017 Amendment”), the identification and declaration of Significant Beneficial Owners (“SBO”) has been a vexed issue for India Inc.Continue Reading Identification of SBO – Deeper Reflections
One aspect which English Company Law has always grappled with is the manner in which the capital of a company should be protected for the benefit of its creditors. Way back in 1887, in its celebrated decision in Trevor v Whitworth[1], the House of Lords held that the statutory restrictions on a company’s power to reduce its capital “is to prohibit every transaction between a company and a shareholder, by means of which the money already paid to the company in respect of his shares is returned to him”.Continue Reading MCA’s Notification on Section 67 of the Companies Act, 2013 – Is it an Exemption or an Inclusion under the Henry VIII Clause?
On January 22, 2021, the Ministry of Corporate Affairs (“MCA”) notified the amendments made to Section 135 of the Companies Act, 2013 (“the Act”), along with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021 (“Amendment Rules”), which substantially revamped the CSR Rules, 2014. While the notification of the amendments made to Section 135 [by the Companies (Amendment) Act, 2019, and the Companies (Amendment) Act, 2020] was always on the cards, the onerous obligations imposed by the Amendment Rules was like a bolt from the blue for India Inc.Continue Reading MCA’s FAQs on CSR – Raises more questions than it answers
Coinciding with the demonetisation of currencies by the Government of India in 2016, the Benami Transactions (Prohibition) Act, 1988, was substantially amended and renamed as the Prohibition of Benami Property Transactions Act, 1988 (“Benami Act”). The Benami Act was brought into effect from November 01, 2016. It was a well-timed move to ensure that demonetisation doesn’t become a futile exercise.Continue Reading Declarations of beneficial interest under the Companies Act vis-à-vis the Benami Act: No immunity and no “Ganga Snan”!
Rights issue, as the term denotes, is the recognition of an inherent right of an equity shareholder against dilution of his shareholding in the company. It is a pre-emptive right of the equity shareholder to subscribe to his proportionate share in all further issuance of equity shares.Continue Reading Rights Issue – Is the Board’s Discretion to Allot Unsubscribed Shares Absolute?