Mr. Veerbhan, Student of Maharshi Dayanand University, Rohtak
Meaning of Shareholder
A shareholder is a person, individual, institutes or company who possesses one or more shares in a company. It is also known as stockholders. Shareholders are not interested in their active interest in the work and management of the company. There are some issues in which control decisions should be approved as part of the Business Act, in accordance with normal or special resolutions.
Types of Shareholders
- Equity Shareholders: These shareholders have the right to vote and the company’s interests. Nevertheless, in the case of liquidation, it is the last person who received income after all debt and obligations have been resolved.
- Preference Shareholders: These shareholders don’t have right to vote and they get priority in dividends and repayment in case of liquidation.
Rights of Shareholders
Shareholders have following rights.
- Right to Vote :Shareholder have right on very important matters which is related to company. It includes:
- Appointment or removal of Directors.
- Approval for mergers, acquisitions or sale of any assets.
- Change in company’s constitution, such as Article of Association and Memorandum of association.
- Changes in Company’s share capital structure.
- Right to dividend
Shareholders have the right to receive a share in the company’s profits in the form of dividends. Section 123 of the Companies Act, 2013 specifies the provisions for the declaration and payment of dividends. Two types of dividends are provided to shareholders.
- Cash Dividends: Dividends are given in the form of cash.
- Stock Dividends: Dividends are given in the form of additional shares.
- Right to inspect Books and Records
Every Major Shareholder has the right to inspect the company’s financial statement and records. Sections 136 and 137 of the Companies Act, 2013 gave power to shareholders that they can access any such records of the company.
- Right to appoint and Remove Directors
Shareholders have right to the appointment of directors by passing the ordinary resolutions. Shareholders have the right to fill the vacancies on the board. Shareholders can change to decision regarding director appointment and removal.
- Right to Participate in General Meetings
Shareholders have right to attend general Meetings of company to discuss key matters such as director appointments, company financial performance and company next strategy. Shareholders have right to ask question to the boards of directors and express their views on any resolution.
- Right to Sue
Shareholders have right to Sue company, directors or officers in case of fraud, mismanagement, or violation of fiduciary duties. Common grounds for shareholders law suits is Fraudulent activity in company, transfer of assets, breach of corporate governance etch. For any legal inquiry Shareholder can approach National Company Law Tribunal (NCLT) in India (Section 241).
- Right to Transfer Shares
Shareholder have right to transfer their share to others by following company guidelines. Section 56 of Companies act, 2013 gave power to shareholders to transfer shares but this transfer must consistent with the article of association of the company.
- Pre-Emptive Rights
Shareholders have rights to purchase company new share which was issued by company. This right helps shareholders to maintain their ownership in the company.
- Rights to Liquidation Proceeds
At the time of company’s Liquidation, shareholders have right to take company remaining assets after creditors and preference shareholders have been paid
- Rights to Divest
Shareholder have rights to sell their shares and divest their holding, if they are not satisfied with company’s performance or governance. Through this right they can protect their financial interests.
- Right to Notice of Meeting
Shareholders have right to receive a prior notice of general meeting, including details, venue and resolution of meeting. Shareholders have right to request to the board for call a general Meeting.
In Biswanath Prasad Khaitan vs. New Central Jute Mills Company Limited[1], Calcutta high court held that the notice convening an extraordinary general a meeting must be fairly and intelligently framed and it must not be misleading or equivocal.
In the case Harinagar Sligar Mills Ltd., v. Shyam Sunder Jhunjhunwala[2], the Supreme Court held that in an appeal under section 111(3) the dispute relates to the civil rights and in deciding the appeal the Government acts as a tribunal and not as an executive body.
- Minority Shareholder’s Rights
To protect the interests of minority shareholders, the law provides mechanisms to combat complaints such as restraints by majority shareholders, management errors by directors.
violation of the company’s constitution.
Remedies available for Shareholders
In India, there are several remedies available for shareholders which protect their rights. Here are some remedies for shareholders:
- Oppression and Mismanagement
According to Section 241 and 242 of the Company Act, 2013 shareholders may complain about the National Court of NCLT (National Company) if the company’s work is suppressed or damaged by public interests. This allows shareholders to help with the oppressive behaviour of the company’s management.
- Derivative Action
Shareholders take legal action on behalf of company if the company’s management work against its company’s interest. This is known as Derivative Action. It allows shareholders to hold the management accountable for acts that harm the company
- Class Action Suits
Shareholders can file class action suits under Section 245 of the Companies Act, 2013 to finding compensation for the act of damaging the interests of the company or shareholders. Class lawsuits allow shareholder groups to compensate for compensation or corrective measures.
- Right to Sue for Mismanagement
Shareholders can sue the company’s management for mismanagement or breach of fiduciary duties. This ensures that the management acts in the best interests of the company and its shareholders.
- Fraudulent Activities
Under Section 447 of the Companies Act, 2013 those who have been convicted of fraud with the participation of the company may be seriously fined, including imprisonment and fines. This includes a forgery of the company’s input, distortion of the representative, and fraudulent events such as false practitioners.
- Misappropriation of Funds
If the company’s management or any kind of employees are convicted of the company’s illegal funds, they may be responsible for the criminal law. This includes embezzlement, disconnection of funds and unauthorized use of company assets.
- False Statement and Documents
Under Section of 448 of Companies act, 2013 a person who makes a false statement of a company or shareholder or provides false documents may be criminals. This includes providing false information of financial statements, reports and other official documents.
- Non-compliance with Regulatory Requirement
If anyone cannot comply with regulatory requirements such as maintaining appropriate records, submitting necessary documents, and compliance with corporate governance standards, it can lead to criminal prosecution. This includes a fine for ineligible for the Registrar of Companies (ROC) and other regulators.
Conclusion
Protection and evaluation of shareholders is important and necessary for creating a fair, transparent and responsible corporate world. Since 2013, the law on the company is an important basis for protecting shareholders, an important basis for maintaining the power of the corporate institution, which controls its leadership and owners. But there is still a difference to visit such a guarantee. Despite the fact that most of these problems have been carried out, there are still problems that need to be solved by limited transparency and protection of minority shareholders. Given that India’s corporate sector is being developed, this problem must be solved for the right development of the company.
The progress in the direction of a more balanced fair environment strengthens the practices of corporate governance, motivate more shareholders, and continuously growing companies and shareholders reveal their rights, and have the impact on the influence of management control, definition and sincerity and integrity and integrity and integrity and integrity and integrity and integrity and integrity and integrity and integrity and integrity.
When we constantly grow the balance of authority and ownership, we need to strengthen faster and faster legal action. Integrity and intellectual performance ownership and sincerity of sincerity.
[1] Biswanath Prasad Khaitan v. New Central Jute Mills Co., Ltd., 1960
[2] M/S. Harinagar Sugar Mills Ltd. vs Shyam Sundar Jhunjhunwala, 1961
