Wisdom Crux

Shareholder Democracy and Corporate Governance

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[Volume 2; Issue 12]

Author- Sneha Singh, B.A.LL.B (Hons.), Chanakya National Law University, Patna 

Co-Author- Prerna Shikha, B.A.LL.B (Hons.), Chanakya National Law University, Patna 

“The highest measure of democracy is neither the ‘extent of freedom’ nor the ‘extent of equality’; but rather the highest measure of participation”[1] – A. D. Benoist

ABSTRACT

The recent spate of emergencies besetting the corporate and financial sectors around the world has activated the modern wave of corporate governance reforms which call for more noteworthy empowerment for institutional and retail shareholders. The requirement for such changes cannot be more prominent anywhere else than in India where controlling shareholders, or promoters rule the corporate landscape. Consistent with changes in several nations that look for to confer greater power within the hands o shareholders, the recent regulatory advancements in India means a more prominent opportunity for shareholder participation within the form of postal poll or e-voting. Like the fast expansion of proxy advisory firms, a hitherto non-existent marvel in India, offers shareholders with the exhortation essential to work out their corporate franchise in an educated way. The presence of activist institutional shareholders such as private equity funds and hedge funds has as of now caused a change in few corporate meeting rooms in India. While these advancements clear the way for a change within the tenor of the governance debate, shareholder activism experiences certain basic and institutional shortcomings inserted within the Indian markets. The dominance of controlling shareholders in most Indian companies works to hose the impacts of shareholders activism. The legal system and institutions in India are not conducive to rendering convenient and cost-effective remedies to shareholders who adopt a litigation technique to counter managements that are seen to act unfriendly to shareholders interest. This paper finds that in spite of the fact that shareholder activism is becoming substantial within the Indian markets, its effect as a degree of corporate governance enhancement is far from clear. The paper through its various chapters deals with the need for corporate governance in today’s corporate world, what are the provisions under Companies Act, 2013 which deals with shareholders democracy and corporate governance and the practical instances where shareholders democracy was exercised.

 The process set up for the firms based on certain systems and principles on which the company is governed is called Corporate Governance. The guidelines enumerated ensure that the company is directed and governed in such a way so as to achieve the goals and objectives to add credit to the company and also benefit the stakeholders in the long term. For the growth, profitability and stability of any kind of business, transparency in corporate governance is most substantive. The growth of competition in economic sectors at the national as well as international level has intensified the need for corporate governance. At the International level[2], a great deal of debate is going on. Corporate Governance has been defined by the famous Cadbury Committee in its (Financial Aspects of Corporate Governance which was published in 1992) as “the system by which companies are directed and controlled”.[3]

The Organisation for Economic Cooperation and Development (OECD) through its Principles of Corporate Governance published in 1999 gives a very extensive description of corporate governance, as a set of interconnection between a company’s management, its shareholders, stakeholders and its board. Corporate governance also yields the structure through which the goals of the company are set, and the means of accomplishing those goals and monitoring performance are determined. Proper incentives for the board and management to follow goals that are in the interests of the company and shareholders should be provided by good corporate governance and it should also aid effective monitoring and thus encouraging firms to use recourses more handily.[4]

A set of connections between the company’s management, shareholders, board members, auditors and other stakeholders is provided by good corporate governance. These connections, which include various rules provides the structure through which the goals of the company are set, and the means of securing these goals as well as monitoring performance are buckled down. Thus, the essential ingredients of good corporate governance consist of transparency of corporate structures and operations, the responsibility of managers and the boards to shareholders and corporate accountability towards stakeholders. As corporate governance fundamentally lays down the outline for establishing long term trust among companies and the external providers of capital, it would be erroneous to consider that the value of corporate governance lie exclusively in improved access of finance. It is being realized by companies around the world that enhanced corporate governance adds considerable significance to their operational performance.[5]

Due acknowledgment to the Stakeholder’s theory has been given by good corporate governance. The main purpose of the stakeholder’s concept as theory is to show that the company together with its executive board is accountable not only for shareholders but also for persons or groups that have a stake in the actions and decisions of such association.[6]

Cadbury Committee on Corporate Governance – 1992

The goals of the Cadbury Committee include helping to improve the standards of corporate governance and the degree of confidence in financial reporting and auditing by setting out evidently what it sees as the particular responsibilities of those concerned. The committee examined the liability of the board of directors to shareholders and to the general public. In its report the “Code of Best Practices” in 1992 it spelt out the techniques of governance needed to attain a balance between the indispensable power of the board of directors and their proper responsibility.[7] Its recommendations were not obligatory. This code of best practices had nineteen recommendations. The recommendations are in the form of guiding principles relating to the board of directors, non-executive directors, and executive directors and on those reporting and managing. The Cadbury committee report lays emphasis on the crucial role of the board and the necessity to observe the Code of Best Practices. It also includes guidelines for setting up of an audit committee with independent members.[8]

The Confederation of Indian Industry Code

India has witnessed the launch of major corporate governance since the middle of 1990s. The Confederation of Indian Industry (CII) was the first among them. It is India’s top-notch business association which came up with the voluntary code of corporate governance in 1998.[9] The second was through the Securities and Exchange Board of India (SEBI) which is now incorporated as Clause 49 of the listing agreement. The third was the Naresh Chandra Committee whose report was submitted in the year 2002. The fourth was again by the Securities and Exchange Board of India — the Narayana Murthy Committee whose report was also submitted in the year 2002.

SEBI revised Clause 49 of the listing agreement in August 2003 based on the suggestions of some of the committees. Afterwards, SEBI Clause 49 in December 2003 was withdrawn and presently the original Clause 49 is in force.[10]

An year before the commencement of the Asian crisis, a committee to analyse corporate governance issues was set up by Confederation of Indian Industry and it recommended to comply with the voluntary code of best practices. The committee was focused on the idea that good corporate governance was important for Indian companies to access capital both at domestic and global level at competitive rates. The first draft of the code was framed by April 1997 and the final document was widely released in April 1998. The code was voluntary and consisted of detailed provisions and its prime focus was on the listed companies.[11]

Kumar Mangalam Birla Committee Report and Clause 49

A committee was set up by Securities and Exchange Board of India (SEBI) in the beginning of 1999 under Kumar Mangalam Birla to uphold and lift up the standards of good corporate governance. The recommendations given by this committee was accepted by the board of SEBI and it was also enshrined in Clause 49 of the Listing Agreement of the Stock Exchanges.[12] This report highlighted that corporate governance involves not only shareholders but also stakeholders. The recommendations of the committee have looked at corporate governance from the outlook of stakeholders and specifically that of the shareholders and investors. The report given by the committee provides for a set of recommendations. These recommendations are expected to be imposed on listed companies for initials disclosures. It was recognized by the committee that a basic system of corporate governance was positioned in India and that a number of initiatives has been taken by SEBI for improving the standards.[13]

Naresh Chandra Committee Report

The Department of Company Affairs (DCA) under the Ministry of Finance and Company Affairs appointed Naresh Chandra Committee in August 2002 to scrutinize various corporate governance issues. A report was submitted in December 2002 by this committee. Two key facets of corporate governance were recommended- the financial and non-financial disclosures and independent auditing. The report of the committee consisted of various aspects with reference to corporate governance such as role, remuneration, and training and also of the ties of the company with the directors, auditors, auditing committee and the methods by way of which their roles can be improved. The committee parsimoniously believes that a strong indication of the management commitment to governance is a good accounting system.[14] Good accounting stands to guarantee that optimum disclosure and transparency should be consistent and credible and it should have comparability. The committee states that the lead actor[15] in a company is a statutory auditor. This has been adequately recognized in the disclosure front from sections 209 to 223 of the companies act.

Narayana Murthy Committee Report on Corporate Governance

The guidelines given by the Narayana Murthy committee is the fourth initiative in India on corporate governance. This committee was set up under the chairmanship of Mr. N. R. Narayana Murthy by Securities and Exchange Board of India (SEBI). This committee was set up with the prime objective to review Clause 49 and put forward measures to enhance corporate governance standards.[16] Some of the major recommendations given by the committee is largely related to audit reports, independent directors, risk management and codes of conduct and financial disclosures.[17]

Need for Corporate Governance

A company which possesses good corporate governance has a much higher level of confidence in the midst of the shareholders linked with that company. Independent directors contribute in the direction of a positive outlook of the company in the financial market, positively influencing share prices. One of the most significant criteria for foreign institutional investors is corporate governance which helps them to decide to invest in which company.[18]

The corporate practice in India highlights the functions of audit and finances that encompasses legal, moral and ethical connotations for the business and its impact on the shareholders. Various pioneering measures to balance appropriately legislative and regulatory reforms for the upliftment of the enterprise and to augment foreign investment, keeping in mind international practices was introduced by the Indian Companies Act of 2013.[19] The rules and regulations are measures that increase the involvement of the shareholders in decision making and introduce transparency in corporate governance, which ultimately safeguards the interest of the society and shareholders.

Corporate governance provides protection to not only the management but also takes care of the welfare of the stakeholders as well and fosters the economic advancement of India in the roaring economies of the world.

The call for corporate governance is highlighted by the following factors[20]:

  • Wide Spread of Shareholders: In the present day scenario a company has a large number of shareholders all over the nation and even around the globe and the majority of shareholders are unorganised having an indifferent approach towards corporate affairs. Shareholders democracy remains constrained to the law and the Articles of Association that require a practical execution by a code of conduct of corporate governance.
  • Changing Ownership Structure: In the present-day-times with institutional investors (both foreign as well Indian) and mutual funds becoming the largest shareholders in corporate private sectors, the outline of corporate ownership has changed considerably. These investors have turned out to be the supreme challenge to corporate managements, coercing the latter to follow the recognized code of corporate governance to build up its image in society.
  • Corporate Scams or Scandals: One thing that has shaken public confidence in corporate management is corporate scams. One of the biggest scandals which is the Harshad Mehta scandal is in the hearts and minds of all those associated with corporate shareholding or otherwise being educated and socially conscious. The need for corporate governance is vital for reviving the confidence of investors in the corporate sector towards the economic improvement of society.
  • Greater Expectations of Society of the Corporate Sector: Society of today holds greater expectations of the corporate sector in terms of reasonable price, better quality, pollution control, best utilisation of resources etc. Code of corporate governance is needed to meet social expectations and for the proper management of company in economic and social terms.
  • Hostile Take-Overs: Hostile take-overs of corporations witnessed in several countries put a question mark on the efficiency of managements of take-over companies. This aspect also points out the need for corporate governance in the structure of an well-organized code of conduct for corporate managements.
  • Huge Increase in Top Management Compensation: It has been observed in both developing and developed economies that there has been a great increase in the monetary payments (compensation) packages of top level corporate executives. There is no rationalization for excessive payments to top ranking managers out of the corporate funds as it is the property of shareholders and society. This factor entails corporate governance to control the ill-practices of top managements of companies.
  • Globalisation: Desire of more and more Indian companies to get listed on international stock exchanges also focuses on a need for corporate governance. In reality corporate governance has become a catchphrase in the corporate sector. Only those companies which are well-managed according to code of corporate governance are recognized by the international capital market.

Shareholders Democracy under Corporate Governance: Companies Act 2013

This chapter explains the shareholder democracy as a mode of corporate governance. It starts by analysing the areas of company decision-making that are generally assigned to the shareholders, and considering whether corporate efficiency could be increased by expanding the number of issues over which the members have the last word.

Shareholders’ legal rights to take part in corporate governance are often said to constitute “corporate democracy. In this dynamic time period, the government had been the regulator of corporations. The legitimating power of “shareholder democracy” is unjust. Settlements in the balance of power between shareholders and management try to achieve corporate governance in harmony with its self professed aspirations about governance. But those aspirations are barely “democratic.” Corporate democracy is the basis of keeping transparency in company.[21] The basic issue of shareholders taking part in Corporate Governance is that of disclosure and information flow to the shareholders. So it is about sharing information with the shareholders and also about participation of shareholders in the administration of companies. But it does not mean that shareholders are an alternative to the management dissolving role of directors in corporations. A basic principle is directors are not shareholders manage the company. But failure of corporate governance makes directors liable to respond shareholders. This essence of checks and balance is corporate democracy where shareholders have such powers to question the management. Company with thousands of shareholders should run like democracies. The corporate democracy is an essential part of corporate governance. It is considered as a participation and contribution of stakeholders in corporate governance. Shareholders are major part of stakeholders in any public company. Shareholders can advance corporate democracy by giving their vote and electing directors to regulate the affairs of the company. They can make contribution by expressing their views in the affairs of company. Shareholders are one of the vital parts in the company. They are statutorily entitled to influence and even frame major corporate decisions.[22]

Like in any other Institutional Framework or system of governance in the Corporations also a system of democracy exits which follows the same principles but with a less vigour. The directors in a corporations are accountable to the shareholders whereas the shareholders are required to participate in the decision making process in order to create a ‘check and balance’ approach and there should be transparency in all the actions of the corporation whether they are taken by company or by the shareholders. Shareholders Democracy which is part of corporate democracy means that a company is under the control of its shareholders. In this every shareholders has equal opportunity to elect and constitute a board of directors to manage and conduct the affairs of the company. They act under as agents and trustees for the company in a fiduciary capacity. As such, their meaningful participation at company meetings is an imperative.[23]

There are various methods available to shareholders to participate in corporate governance within the Indian Companies Act, 2013. Both the actual procedures as well as the problems arising which obstruct or raise the costs of shareholder participation have also been discussed, in each of these methods. The methods available within the Indian Companies Act, 2013 for shareholders to participate in corporate governance are as follows:

General Meeting

According to Section 100 of the Companies Act, 2013 General Meetings are of three kinds: Annual General Meeting (AGM), Extraordinary General Meeting (EGM) and Class Meeting.[24] AGM is of great significance as it is a mandatory statutory requirement to hold an AGM at the specified period complying with the conditions laid in Section 96 of Companies Act, 2013.[25] The time period between two AGMs cannot be more than fifteen months and there must be an AGM in every calendar year.[26] Also, the requirement of submission of Report on AGM containing a fair and correct summary of the proceedings of the meeting has to be compiled with. This implies that the AGM has to be conducted by the Board of Directors, even if it does not want to which might be the situation if the Company has performed poorly and so this being a mandatory requirement itself makes the AGM a powerful tools in the hands of shareholders. Further, through AGM not only important business is transacted but also shareholders are informed of the important aspects of the functioning of the Company, principally relating to the financial health of the Company. The shareholders can question the directors, raise important issues regarding the company, pass resolutions and exercise their power with respect to appointment of directors standing for re-election and removal of directors. Though most of these transactions can also be undertaken in EGM but the members who may want to raise such issues may not be able to ask for conducting the meeting because of the strict requirement of the total number of members required to conduct an EGM as specified in Rules 17 of the Companies (Management and Administration) Rules 2014. Due to this the mandatory and regular occurrence of an AGM assumes such great significance.[27]

Appointment of Directors and Power of Removal of Directors

The most important business transacted in a General Meeting deals with the appointment of directors in the place of those retiring by rotation as, not less than 2/3rd of all the Directors of a company are to be appointed by General Meeting and 1/3rd of those directors have to retire by rotation every year. Therefore, if the shareholders are not satisfied with a particular director, he will not be appointed again, in an AGM. Moreover, under Section 169 of Companies Act, 2013, any director of the company can be removed by passing an ordinary resolution in a General Meeting. The issue of exercising the powers of election in an AGM are that primarily in big companies the existing management unless the situation is dire; often command the loyalty of shareholders, simply by virtue of being in office. Further, the existing board of directors has the whole of the companies’ resources at their disposal to conduct an elaborate public relations exercise with respect to their re-election. Another trick that has been used by directors is to have special voting rights with respect to their shares in the Articles of Association of a company thereby defeating the very purpose of having a re-election. Thus, as has been expressed before in this paper, the board of directors tends to be self-perpetuating body.[28]

Placing of Accounts, Balance Sheet, Report of Director, Auditor and Corporate Governance Report

The next important aspect of an AGM is with regard to the placing of the Balance Sheet, Accounts as well as the reports of the director and auditor for consideration in the meeting. Informing the shareholders regarding the health of the Company and letting them voice their concerns regarding the same is most important and it takes place in the AGM only. All the above mentioned documents are to be sent to a shareholder twenty-one days prior to the commencement of the AGM and since these documents are mostly complicated; this period should be extended so that interested shareholders can understand the affairs of the company. There are other matters too which are to be considered at the AGM such as appointment of auditors, which is usually a formality of re-appointing the existing auditor unless a member questioning the re-appointment has passed a special resolution and matters like fixing the auditor’s remuneration and declaration of dividend.[29]

Procedure for a General Meeting

The important aspects of such procedure, as well as the problems arising out of the same and suggested reform have been highlighted below:

1) The AGM has to be conducted in the place of the registered office or city where the registered office is situated. This is different from a General Meeting; which can be held at distant areas discouraging shareholders from attending. However, a disadvantage is that an AGM cannot be held on a “public holiday”; which means that attendance of the shareholders will reduce as they will have to take leave from their work.[30]

2) A “clear notice” of 21 days has to be given to shareholders and other parties under Section 101 of Companies Act, 2013. The notice should contain details regarding the kind of business to be transacted at the AGM; but details and explanatory notes are required only in the case of special business. However, this may lead to the company undertaking important business, in the guise of ordinary business at the AGM leaving the shareholder unprepared to deal with the same.[31]

3) In relation to the quorum on the AGMs, statutes provide that proxies are not allowed. It is significant to note that such quorum is not required to be present at the adjourned meeting. Further though the statute does not specify that the requirement of the quorum is throughout the meeting, it can be interpreted that statutes provide an effective quorum is required throughout the matter transacted and not only at the commencement of the meeting.[32]

4) The most disputed area of the business of a company is with regard to the right of every member to appoint a proxy. Though, proxies are considered to facilitate shareholder democracy, they can also lead to solicitation of votes by the Board of Directors as the whole machinery is heavily inclined towards the management. This is because even the Board of Directors always strikes the first blow before the opposition can start getting proxies in its favour. Further, proxies do not have the right to speak at meetings and are not counted when a vote by show of hands is taken which can lead to absurd results. However, it is submitted that in view of the fact that members may not be able to attend the AGM; proxies are an essential and further the recent reforms allowing voting by postal ballot/electronic means are a step in the right direction. Apart from the problems seen above, a measure to educate the shareholders about the mechanisms of lodging a proxy vote would be greatly beneficial.[33]

5) The next important matter is with regard to member’s resolution that can be passed through circulation. In theory this is a powerful weapon in the hands of the shareholders; but is exercised rarely. The reason is due to the timing of such a resolution notice of which has to be given to the company 6 weeks in advance of the general meeting. Considering only a 21 day notice is to be given before taking place of a general meeting and all the important documents and matters are given to shareholders only then; if a shareholder wants to raise a resolution regarding the material circulated it would be impossible to do so. Such resolution require either a substantial shareholding or the interested members to co-ordinate with many others to move the resolution, which is difficult considering records of beneficial ownership of shares are not with the company registers. Further, the company will then provide the notice of such resolutions to all its other members at the expense of the requisitionists.[34]

6) As per Section 169 of Companies Act, 2013, a special notice to be given for removal of directors. It may prove a difficult initiative for shareholders to take. There is just not enough time to let either the company or shareholders make informed decisions, as supplementary information by the director/auditor proposed to be removed must also be given within this time frame.[35]

Oppression and Mismanagement under Companies Act 2013

Another method by which shareholders can exert some influence in the realm of corporate governance is through the provisions of Companies Act 2013 that deal with oppression and mismanagement. On an application by shareholders the Court examines the affairs of the company as conducted by the majority shareholders or the directors and whether such conduct is oppressive to the minority shareholders. The oppression will depend on the facts of each case. However, the conduct must be burdensome, harsh and wrongful. Mere lack of confidence between the majority shareholders and the minority shareholders would not be enough unless the lack of confidence springs from oppressive conduct of affairs, and such oppression must involve at least an element of lack of probity or fair dealing to a member in the matter of his propriety rights as a shareholder. By reasons of such acts of oppression, it must be shown that the majority secured pecuniary advantage or wrongfully usurped authority.[36]

 Two core principles need to be highlighted in this regard. First, it must be noted that the English Companies Act does not require a minimum number of members to file a petition. It appears that even a single member can file a petition. This on one hand makes the remedy more readily accessible and may on the other hand also leads to frivolous litigation. Companies Act 2013 does not either expressly or by necessary implication indicate that the consent to be accorded there under should be given by member personally. The power to give consent can also be delegated to an agent. It must be kept in mind that if the persons who gave their consent for filing o the petition subsequently withdraw their consent, it does not affect the proceedings. The Company Law Board regulations in this regard are not mandatory and substantial compliance with them is sufficient. Thus where it is clear that the consent of the shareholders is there even though it may not have been expressed clearly, it would not affect the petition. Secondly, both actual and apprehended prejudice is taken care of by English Company Law, while on the other hand, the Companies Act, 2013 talks of very specific circumstances, i.e., change in the management and control, which may lead to the apprehension of prejudice. Thus the scope of Indian Companies Act in this regard is restricted and in reality not too many cases succeed under this category.[37]

Practical Instances of Shareholders Democracy

India is experiencing a rise in shareholder activism. The rejection of an increase in remuneration of certain key executives of Tata Motors by its shareholders in July 2014[38] is an early example of shareholder activism in India. However in January 2015 when voting was conducted, the shareholders voted in support of the increase in remuneration. More recently, in June 2017, shareholders of Raymond Ltd rejected the sale of JK House at an allegedly below market price to the promoters of Raymond Ltd.[39]

The afore-mentioned triumphs for investors have paved way for others to particpate in the management of the affairs of the company. In July 2017, Unifi Capital Private Limited (“Unifi”) sought the appointment of a director representing small shareholders on the board of Alembic Limited. Similarly, in September 2017, certain shareholders of Religare Enterprises Ltd (“Religare”) including India Horizon Fund filed a petition before the NCLT to prohibit Religare from making an investment of around INR 500 crore in its subsidiary. Apart from these, the shareholders of Religare also wanted to expel the board of directors on the ground of recurrent and arcane write-offs by the company and its subsidiaries.[40]

Some notable incidents have also been witnessed when certain shareholders took an active interest in the management of the company but failed to secure majority of the votes of the shareholders in their favour. For example, Florintree Advisors Private Limited (“Florintree”), in September 2017, moved the proposal to assign a nominee of ‘small shareholders’ on the board of directors of PTC India Limited. However this proposal was not supported by majority of the shareholders.

Likewise, in the proposed union of HDFC Standard Life Insurance Company Limited with Max Financial Services Limited, certain substitute firms (shareholders of Max Financial) had urged shareholders to vote in opposition to the payment of non-compete fee to the promoters since the rationale following such payment was not clear. However, this plea did not go through and 65% of shareholders voted for the payment of the non-compete fee. The amalgamation was ultimately called off due to various reasons.[41] Though the above two instances may appear to be a failure for institutional activist investors, it shows the beginning of a trend of shareholder activism, which, is on a rise.

One of the very recent examples of shareholders activism can be seen in case of Fortis Healthcare where Fortis Healthcare shares tumbled 13.3% on after minority shareholders slammed the sale of its hospital business to Manipal Hospitals. The Fortis board approved the demerger of its hospitals business to Manipal and TPG Capital along with 50% in diagnostics chain SRL. They are unhappy over the deal undervaluing the worth of the hospital business significantly. They also complain that the valuation of Manipal is not transparent. They contended that the hospital business Fortis Healthcare (FHL) has been valued at around Rs 95 per share compared with consensus analysts’ estimate of Rs 125-150 per share.[42]

Conclusion

Any company which has good corporate governance has a much higher level of confidence amongst the shareholders who are associated with that company. The corporate cultures in India emphasize the functions of audit and finances that have legal, moral and ethical implications for the business and its impact on the shareholders. The Indian Companies Act of 2013 brought in contemporary measures to appropriately balance legislative and regulatory reforms for the growth of the enterprise and to increase foreign investment, in line with international practices. The rules and regulations are measures that increase the involvement of the shareholders in decision making and introduce opaqueness in corporate governance, which in turn safeguards the interest of the society and shareholders. Corporate governance not only safeguards the management but the interests of the stakeholders as well. It also fosters the economic progress of the nation in the roaring economies of the world.[43]

A Company is regulated by its Board and the shareholders are the voters who alter the decisions through the various channels prescribed by the law. To assimilate the principles of democracy in our corporate culture, every eligible member should have to make efforts or determined attempts in the decision making process of the company and the legislature should have to make laws according to the dynamic global scenario and to implement the laws not only in letter but also in spirit.[44]

SEBI appointed a panel which has proposed many new rules to boost corporate governance. The intent is admirable, but a mere change in the form does not guarantee better corporate governance. Two changes which companies need: a functional market for corporate control and greater shareholder democracy that demands better performance and holds managements to account. Globally, shareholder activism is on the rise, with investors demanding corporate overhauls. Instead of focusing just on board-level changes, SEBI must faciliate greater shareholder democracy.[45]

In SEBIS’s board meeting on 28th March, 2018 it considered the Kotak Committee report on corporate governance. The Kotak Committee had submitted the Report proposing amendments to the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (LODR) with the objective of enhancing fairness and transparency in the corporate governance landscape in India.[46]

Corporate India has to prepare itself to accept a renovated corporate governance code. SEBI’s decisions show its willingness to undertake strong and bold measures to improve the corporate governance landscape in India, which is need of the day. To achieve desired results, SEBI must back this up with more stringent enforcement of the regulations on errant listed entities to have a real effect on corporate governance in India.

[1] Hemant Goel & Sandhya Aggarwal, Supremacy of Shareholders & their Democracy in Line with New Act, 2013, Mondaq (Sept 3, 2018, 10:00 PM), http://www.mondaq.com/india/x/286620/Shareholders/Supremacy+Of+Shareholders+Their+Democracy+In+Line+With+New+Act+2013.

[2] James Mc Ritchie, Corporate Governance in India, Corporate Governance: improving accountability through democratic corporate governance since 1995, corpgov.net (Sept 30, 2018, 10:42 PM) https://www.corpgov.net/2015/05/corporate-governance-in-india/.

[3] Neeta Shah & Christopher D. Napier, The Cadbury Report 1992: Shared Vision and Beyond,4, Shah & Napier Cadbury Report and Beyond, 1, 4, 2016.

[4]OECD Principles of Corporate Governance, (Sept 30, 2018, 10:48PM), https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=C/MIN(99)6&docLanguage=En.

[5]Weaknesses of corporate governance in India, Academike, (Sept 30, 2018, 10:49PM), https://www.lawctopus.com/academike/corporate-governance-in-india/#_edn5.

[6] Ibid.

[7] Dr. G.K. Kapoor & Sanjay Dhamija, Company Law, 630 (20th ed., 2017).

[8] Dr. N. V. Paranape, Company Law, 512 (7th ed., 2016).

[9] Supra note 7, at 632.

[10] Supra note 5.

[11] Supra note 8, at 514.

[12] Supra note 7, at 632.

[13] V. Sithapathy, Corporate Governance, 310 (1st ed., 2006).

[14] Supra note 13, at 315.

[15] A. K. Majumdar & Dr. G. K. Kapoor, Company Law, 421 (13th ed., 2010).

[16] Ibid.

[17] Supra note 13, at 317.

[18] Supra note 2.

[19] Supra note 7, at 635.

[20] Meghna Thapar & Arjun Sharma, Corporate Governance in India: an Analysis, 4 Journal of Economic and Social Development 81 ,85 (2017).

[21] Vaibhav Sonule & Prof. Dr. Bindu Ronald, The Eclipse of Corporate Democracy in India, 6 International Journal of Humanities and Social Science Inventions 1, 2 (2017).

[22] Supra note 20.

[23]Shareholders Democracy: its Importance and effectiveness, Law Projects for Free, (Sept 30, 2018, 10:51 PM), http://lawprojectsforfree.blogspot.in/2010/09/company-law-shareholders-democracy-its.html.

[24] S. 100, Companies Act, 2013.

[25] S. 96, Companies Act, 2013.

[26] Ibid.

[27] Rule 17, Companies (Management and Administration) Rules, 2014.

[28] S. 169, Companies Act, 2013.

[29] Iragavarapu Sridhar, Corporate Governance and Shareholders Activism in India-Theoretical Perspective, 6 Theroretical Economies Letter 731, 738 (2016).

[30] Supra note 32.

[31] S. 101, Companies Act,2013.

[32] Supra note 32.

[33] S. 105, Companies Act, 2013.

[34] S. 111, Companies Act, 2013.

[35] S. 169, Companies Act, 2013.

[36] S. 241, Companies Act, 2013.

[37] Supra note 36, at 739.

[38] Ashish K. Mishra, Tata Motors Shareholders Reject Proposals Executive Pay, Live Mint, Jul 3, 2014.

[39] N. Sundaresh Subramanian, Raymond Shareholder Defeat JK House Sale Plan, Business Standard, Jun 6, 2017.

[40]Religare Case: NCLT Says No to Interim Stay on Rs. 500 crore Investment, Money Control, Nov 16, 2017.

[41]HDFE Life- Max Merger: Max Financial Shareholders Agree to Non-Compete Fee, Live Mint, Nov 28, 2016.

[42] Jwalit Vyas, Divya Rajagopal & Prashant Mahesh, Minority Shareholders Upset Over Fortis Plan to Merge with Manipal, The Economic Times, Mar 28, 2018.

[43] Supra note 2.                                                                     

[44] Supra note 1.

[45]Corporate India Needs Shareholder Activism, The Economic Times, Oct 8, 2017.

[46] Kalpana Unadkat & Pranay Bagdi, SEBI’S Thumbs Up to Much Awaited Corporate Governance Regime is a Sign of More to Come, Money Control, Apr 3, 2018.