Balancing Majority Rule And Minority Rights: The Evolution Of Shareholder Protection In India
- IJLLR Journal
- 34 minutes ago
- 1 min read
A. Sathya Dharshini & B. Smruthi, Sastra Deemed To Be University, Thanjavur.
ABSTRACT
In the modern corporate world, people invest their money in companies by buying shares, expecting good returns and financial security. However, most of these companies are controlled by the management or majority shareholders who have the power to appoint most of the directors. As a result, the interests of minority shareholders are often left unprotected. While minority shareholders benefit when the company performs well, problems arise when those in control act for their own benefit rather than for the company’s welfare.
The landmark case of Foss v. Harbottle (1843) laid down the rule that the company is the proper plaintiff and that majority rule prevails in internal company matters. Though this principle supports corporate democracy, it often leaves minority shareholders powerless against wrongs committed by those in control. To overcome this, legal systems have developed remedies like derivative suits, where minority shareholders can sue on behalf of the company when the majority commits a wrong.
In India, however, derivative actions remain unclear and underused. With the rise of dispersed shareholding and growing investor participation, there is a strong need to adopt effective mechanisms to strengthen and popularize derivative suits. Doing so will ensure better protection for minority shareholders and promote fairness in corporate governance.
Keywords: Minority shareholders, Proper Plaintiff rule, Internal company.
