Vinay Mishra, LL.M. in Corporate and Financial Law from Jindal Global Law School (O.P. Jindal Global University), LLB from YC Law College (Savitribai Phule Pune University), Fellow Company Secretary at the Institute of Company Secretaries of India
Shareholder Democracy is an expression of inherent democratic rights of a Shareholder of a Company that the shareholders have access, influence, and imprint on the Governance matters of an organization. A person’s investment in the equity capital of a Company, with an expectation of return on investment and capital appreciation, is based upon the performance of the Company against set vision, targets, and decisions that are in the interest of the Company’s profit-making ability. A Shareholder’s right to express his/her assent/dissent proportionate to his/her the percentage of voting shares of a shareholder is a Shareholder Democracy. “Higher the shareholding, higher the voting power” has been at the core of shareholder democracy.
But what happens when this basic shareholder democracy is ceded to create better corporate structures? Is it fair on the part of the legislators subdue and, in some cases, even disregard shareholder democracy to protect certain interests?
Corporate Governance in India has travelled a fair distance since the enactment of the Companies Act, 1956. The Kumar Mangalam Birla Report on Corporate Governance and subsequent inclusion of the Clause 49 of the Listing Agreement, the Companies Act, 2013 and the updated renditions of the SEBI Regulations, especially in respect of Listing Obligations and Disclosure Requirements. What is common in all these pieces of legislation is the fact that some rights (some may call it power) are taken from the majority and ceded to the others.
This paper intends to study the gradual and continuous trespass of legislation under the garb of Corporate Governance into the democratic rights of a shareholder.