The Existence of Shareholder Activism in India: A Factual Occurrence or a Deceptive Perception?
Keywords:
Shareholder activism, corporate governance, proxy advisory firms, minority shareholders, Companies Act, 2013Abstract
The traditional governance of companies globally has revolved around majority rule, wherein the power to make binding decisions for the entire company rests with the majority shareholders. This principle gained legal validation through the English case of Foss v. Harbottle, establishing a norm of judicial non-interference in corporate affairs if the majority decision prevails. This
norm prevailed for decades and shaped corporate governance practices. In India, the concentration of ownership and control in companies has posed significant challenges for activist shareholders. The dominance of business families in controlled companies or government entities in public sector undertakings has hindered the ability of minority shareholders to challenge or influence the functioning of these entities. However, the regulatory developments such as the Companies Act, 2013, and regulations introduced by the Securities and Exchange Board of India have provided momentum to empower minority shareholders. Implementation of the Kotak Committee recommendations and the regulation of Proxy Advisory firms reflect ongoing government interventions aimed at promoting shareholder activism in India. This paper aims to analyze the legal framework of shareholders' rights in India, its impact on shareholder activism, and the necessary statutory and regulatory measures to strengthen it. The paper also delves into emerging trends in shareholder activism in India and prospects for further advancement in this movement. It includes analysis of three key cases related to shareholder rights and corporate governance to assess the potential avenues for activism. In conclusion, the paper presents recommendations to enhance shareholder activism in India, considering the evolving legal landscape and regulatory environment.
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