Under the Companies Act, 2013 in India, minority shareholders are provided with certain rights to protect themselves against oppression and mismanagement. These rights aim to ensure fair treatment and safeguard the interests of minority shareholders. Some key provisions include:
1. Right to File a Petition (Section 241): Section 241 of the Companies Act, 2013, allows minority shareholders (holding at least 10% of the share capital or representing 1/10th of the total number of minority shareholders) to file a petition with the National Company Law Tribunal (NCLT) for relief in case of oppression and mismanagement.
2. Grounds for Oppression and Mismanagement (Section 241): The petition can be filed on grounds of oppression or mismanagement. “Oppression” refers to the conduct that is prejudicial to the interests of the company or its members, and “mismanagement” refers to the improper or inefficient conduct of the affairs of the company.
3. Power of the Tribunal (Section 242): Section 242 empowers the NCLT to make various orders to regulate the conduct of the company’s affairs, including the appointment of a new managing director or director, changes in the company’s articles, or even the winding up of the company.
4. Appointment of Nominee Director (Section 163): Section 163 provides minority shareholders with the right to appoint a nominee director if their shareholding has been consistently oppressed. This director represents the minority shareholders’ interests in the company.
5. Class Action Suit (Section 245): Section 245 allows minority shareholders to file a class action suit against the company or its directors for any fraudulent, unlawful, or wrongful act. This provision is designed to protect the interests of shareholders collectively
6. Inspection of Records (Section 163): Minority shareholders have the right to inspect the records of the company under Section 163. This can be crucial in gathering evidence to support allegations of oppression and mismanagement.
7. Protection of Whistleblowers (Section 177): Section 177 provides protection to minority shareholders who act as whistleblowers, bringing to light any unethical practices, fraud, or mismanagement within the company.
It’s important for minority shareholders considering action under the Companies Act, 2013, to seek legal advice tailored to their specific situation. The legal process involves the National Company Law Tribunal, and a thorough understanding of the relevant provisions is crucial for effective navigation of the proceedings.