COMPANY LAW

SHAREHOLDERS RIGHT TO PARTICIPATE IN THE MANAGEMENT OF THE

COMPANY: PRINCIPLES AND BEYOND

Submitted by

Dheeraj Kumar (17010324088)

Div: D Batch: 2017-2022

Of

Symbiosis Law School, Hyderabad

(Symbiosis International Deemed University, Pune)

In

January, 2020

Under the guidance of

Prof.Dr. Jayendra Kasture

Assistant Professor (Sr)

Symbiosis Law School, Hyderabad

Symbiosis International University, PUNE

ABSTRACT

This study, In the present world corporate governance has become a sensible measure for the
long term success of the company. There has been great interest in corporate governance
because developing good corporate governance is essential to restore economic vitality and
fostering sustainable economic growth and development. In this research paper I have tried to
explain that how shareholders are the owner of the company by the virtue of various rights
and obligations in a company.

For shareholders, effective Corporate Governance structures have become important criteria
for selecting the companies in which they wish to invest when making positive investment
decisions. As the investors are interested in long term benefits therefore they have now
started to analyse the corporate governance structure of the companies. The investors have
now started comparing the various companies that which company has implemented the
various recommendations regarding corporate governance as mentioned in various important
codes.

The important purpose of corporate governance is to safeguard the shareholders rights in the
company and also to pay special attention that there should be equal treatment with the
shareholder of same category. Corporate governance practices have emerged in free market
economies as a set of structural arrangements with an aim of developing a relationship
between the management of companies and the interests of its shareholders. Subsequently,
corporate governance concerns extended to the interest of other stakeholders and eventually
to society at large. Therefore, a sound corporate governance system requires that shareholders
can actively participate in, and exert influence on, corporate strategic decision-making. The
two important principle of corporate governance can be elucidated as:
The first principle:
“The corporate governance practices should give the shareholders a real opportunity to
exercise their rights connected with their participation in the company”.
The second principle:
“The corporate governance practices should ensure equal treatment of shareholders who
own the same number of shares of the same type (category)”.

Keywords: Corporate Governance, Shareholders, Assembly meetings, Ordinary Resolution.

OBJECTIVES OF THE RESEARCH PAPER

The following Aims and Objectives have been identified for this project.
1. To examine the rights of the shareholder’s given by the company
2. To examine how corporate governance is related to shareholder’s rights.
3. To examine the International Scenario of corporate governance related to shareholder’s
rights.
4. To study whether or not there any special circumstance under which passing of ordinary
resolution is necessary?

RESEARCH QUESTIONS

1. Whether the legal protection encourage better corporate governance practices under the
Companies Act, 2013, minority shareholder rights protection, bank performance, and free
cash flow?
2. Whether voting is an absolute right to the Shareholders of a company, if yes, how helpful
is it for the external risk management?
3. Whether in India the institutional investors focusing on long-term ownership of shares?
What implications does it have on participation in the management of the company?

RESEARCH METHODOLOGY

This is a Doctrinal Research project and the relevant material for this project has been
collected from the primary as well as secondary sources. Doctrinal Research is a research as
we all know that it is based on the principles or the propositions made earlier. It is more
based on the sources like books of the library, and through various websites. At this point of
time it is pertinent to review the literature from where the relevant material has been
collected. For the purpose of the said Research Project the Researcher has collected the
relevant material from books on Companies Act 1956 and also from committee reports.

LITERATURE REVIEW

In order to conduct this particular research work, some important articles, books and cases are
formulated. The focal points and assumptions are normally available through the formulation
of the research paper. The major part of the paper developed on the basis of study of available
literature and evaluation of primary as well as secondary data and work done earlier including
related studies. Report of the Kumar Mangalam Committee on Corporate Governance
Recommendations Relating to “Shareholder”, was of great help. Moreover, books like Datey
V.S., “Student Guide to Corporate Law”, (Taxmann Allied Service, 5th ed.,2002) gave some
prominent points to think about. There are several other such cases of abuse of shareholders
right to participate in the management of the company of under Company Law, 2013. Some
of the prominent cases shall be briefly analysed and concluded upon in this Article.