Protecting The Interest Of Minority Shareholders In Squeeze Outs: Comparative Analysis

Shreeya Gupta, Laghima Bhagat & Aarantha Roy, BML Munjal University

INTRODUCTION

A company is an organisation that functions through a democratic procedure, in which the majority shareholders wield substantial influence in the decision-making and implementation of its activities1. Hence, it is crucial to maintain a balanced and harmonious state of affairs between effective corporate governance and the safeguarding of the rights and interests of minority shareholders, with the aim of upholding the core values of shareholder democracy inside the organisation. In a corporate setting, those who possess the largest proportion of shares are sometimes referred to as majority shareholders2. The word "minority shareholder" is not explicitly defined in the Company Law. In general, it is well recognised that individuals who possess a lesser proportion of shares are commonly referred to as minority shareholders. Minority shareholders may be defined as individuals or entities who possess a quantity of shares that is not sufficient to bestow upon them the ability to exercise influence over the firm.

The controversy around the concept of Majority rule and Minority rights has been a central topic of discussion for an extended period of time. The prevailing legal stance is that the rule of majority should be upheld, provided it aligns with the conditions outlined in company law. The legal precedent for this case may be found in the landmark decision of Foss v. Harbottle4. Hence, it is the prevailing majority of shareholders who possess the authority to govern the board of directors, hence leading to the establishment of companies that are predominantly owned and controlled by such majority.