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).
Filed Under
About the Contributors
Debanshu is one of Vidhi’s Co-Founders. He has over a decade of experience in commercial laws and the financial sector and has advised the Government of India on several legislative projects in this space. He was instrumental in advising the Government on the design and drafting of the Insolvency and Bankruptcy Code and its subsequent implementation. He has developed and curated Vidhi’s work on insolvency law, corporate law, financial regulation, and competition law and conceptualized its Bankruptcy Research Program. He has served as a member of a Government-appointed committee for operationalizing the National Company Law Tribunal and deposed before two Parliamentary committees examining financial sector legislation. He has also worked as a teaching fellow at Harvard Law School. He is an alumnus of the Harvard Law School, the University of Oxford, and Hidayatullah National Law University. He attended Harvard as a Fulbright Scholar and was awarded the Irving Oberman Memorial Prize in Bankruptcy and the Dean’s scholar prize in Corporations. He was also awarded a Distinction for his graduate studies at Oxford. In 2017, he was selected for NYU School of Law’s Hauser Global Scholarship, which he waived. His academic work has been published in peer-reviewed journals and an edited book published by Cambridge University Press, New York. He has been consulted by and mentioned in global business publications, such as IFR Asia and The Economist. Earlier, Debanshu practiced as an M&A and regulatory lawyer with AZB & Partners at its Mumbai and New Delhi offices.
