Revisiting Shareholder Ratification In Indian Corporate Governance: Balancing Power And Accountability
- IJLLR Journal
- Jun 28
- 1 min read
Varnika Chaudhary & Zoya Fazar, National Law University, Jodhpur
ABSTRACT
Shareholder ratification is a contentious corporate governance concept intended to endorse the actions of directors post-facto which have been unauthorized. The principle of ratification in India stands at a delicate crossroad where democratic governance and dilution of responsibility meet. Unlike the common-law nations that have established guidelines regarding this concept, the Companies Act, 2013 of India does not provide a set framework on when the violation of the director's duties could be ratified. In this regard, the judgment of Securities Appellate Tribunal in Terrascope Ventures Ltd. v. SEBI poses serious threats in allowing the majority shareholders to endorse the breach of fiduciary duties at the cost of the minority shareholders. Thus, this research paper explores the scope and boundaries of the ratification of breaches within Indian law while comparing it to the UK and Australian case law. Specifically, this paper critically discusses how the agency-based approach to ratification should address the four contemporary challenges of corporate governance, such as separate legal personality, Business Judgment Rule, the inclusiveness of other stakeholders (Section 166(2)), and voting rights as property.
Keywords: Shareholder Ratification, Corporate Governance, Companies Act 2013, Fiduciary Duty, Terrascope Ventures, Minority Protection, Stakeholder Primacy.
