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Shareholder Disputes & Company Litigation

Shareholder Disputes & Company Litigation and Corporate Governance

 

1. Minority Protection Disputes (Section 233 of the Companies Act, 1994)

For minority shareholders, the "Majority Rule" is not absolute. We aggressively utilize Section 233 of the Companies Act, 1994 to break the deadlock when the majority abuses its power.

  • The 10% Threshold: We advise clients on gathering the requisite 10% shareholding (or 1/10th of the issued capital) required to file a petition. If you hold less, we structure alliances with other minority shareholders to reach this legal threshold.
  • Grounds for Action: We build cases based on specific "prejudicial acts," such as:
    • Systematic exclusion from management or Board meetings.
    • Siphoning off profits through excessive director remuneration or related-party transactions.
    • Non-declaration of dividends despite healthy profits (financial strangulation).
    • Diluting minority shareholding through rights issues at undervalued rates.
  • Strategic Remedies We Seek:
    • The "Fair Exit" (Buy-Out Order): The most common and valuable remedy. We petition the Court to order the majority shareholders to buy out your client’s shares at a Fair Value determined by an independent valuer, allowing you to exit a toxic partnership with your capital intact.
    • Board Representation: Securing a Court order for proportional representation on the Board of Directors to ensure future oversight.
    • Cancellation of Resolutions: Obtaining orders to declare illegal resolutions (e.g., removal of a director) void ab initio.

2. Rectification of Share Register (Section 43 of the Companies Act, 1994)

The Company’s Register of Members is definitive proof of ownership. If your name isn't there, legally, you don't exist.

  • Restoring Ownership: We file applications under Section 43 in the High Court to correct the Share Register when:
    • Shares have been fraudulently transferred using forged "Form 117" (Transfer Deeds).
    • A company unlawfully refuses to register a valid transfer of shares.
    • Names have been omitted or deleted without sufficient cause.
  • Title Adjudication: Unlike a simple administrative correction, Section 43 proceedings allow the High Court to decide the Title of the shares. We use this to recover shares lost to family fraud or hostile takeovers.
  • Damages & Interim Orders:
    • Compensation: seeking damages for any loss sustained due to the delay in registration (e.g., missed dividends).
    • Suspension of Rights: We seek interim injunctions to freeze voting rights attached to disputed shares until the register is rectified, preventing the hostile party from controlling the AGM.

3. Condonation of Delay in Holding AGM

A missed AGM is a "Continuing Offence.". We regularize your compliance status through the High Court to prevent penalty and de-registration. Companies often miss their AGM deadlines (15 months from the last meeting) due to internal disputes or force majeure. The RJSC cannot accept returns for a delayed AGM without a High Court order.

  • The High Court Procedure:
    • We file an application under Section 81(2) and Section 85(3) of the Companies Act requesting the Court to "condone" the delay.
    • Newspaper Publication: We handle the drafting and publication of the required Court Notice in national dailies to show transparency.
  • Remedies & Strategic Advantages:
    • Regularization of Returns: The Court’s order acts as a "shield," compelling the RJSC to accept your overdue Annual Returns (Schedule X) and Audited Accounts without the risk of the company being "Struck Off" (Section 368).
    • Appointment of Neutral Chairman: In cases of hostile shareholder disputes where a fair meeting is impossible, we petition the Court (under Section 85) to appoint an Independent Advocate Commissioner to chair the AGM. This ensures that the meeting is not hijacked by a hostile faction and that minutes are recorded accurately.
    • Validating the Board: Holding the condoned AGM validates the appointment/re-election of Directors, stabilizing the company’s management structure for banks and regulators.

 

Client Tip: The "15-Month" Rule

The law allows a maximum gap of 15 months between two AGMs.6 If you miss this window, you are technically in default. No Board Resolution can fix this—only the High Court can. Call us immediately if you have missed your calendar year deadline.