Company Rules on Oppression, Mismanagement and Class-action Petitions

Empowering shareholders against wrongful corporate conduct

The Companies Act, 2013 empowers shareholders to initiate a case of oppression and mismanagement against a company if its affairs are being conducted in a manner prejudicial to the applicant, the company or public interest.  Such applications are to be filed before the National Company Law Tribunal and can also be initiated by the government. 

These rules (which are part of the general rules of the tribunal) provide the procedural framework for making such applications and obtaining appropriate remedies. The Act empowers the tribunal to provide several remedies in such cases, including removal of management, appointment of new managers and even cancelation of past transactions, among others. 

Class-action petitions can be used by shareholders and depositors to bring a collective action against an erring company, its directors, auditors or external advisors to claim damages and compensation for wrongful or fraudulent acts. Like the oppression and mismanagement cases, class-action cases are also to be filed before the National Company Law Tribunal. These rules provide a detailed framework for submitting an application, constituting a ‘class’ and also provides a mechanism for class-members to opt-out of the proceedings.

The purpose of this framework is to deter mismanagement of a company’s affairs and provide appropriate legal remedies for the vulnerable stakeholders in a company (such as minority shareholders and depositors).