Explore how the Companies Act, 2013 and SEBI Regulations empower shareholder democracy in India, enhancing transparency and accountability in corporate governance.
The Companies Act, 2013 as well as SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 (Listing Regulations) introduced several provisions to promote shareholder democracy in India. These provisions aim to give more power and rights to shareholders and protect their interests.
Some of the key provisions related to shareholder democracy under the Companies Act, 2013 and the Listing Regulations are:
1. E-voting [Section-108 r/w Rule 20 of Companies (Management and Administration) Rules, 2014]:
The Act mandates e-voting for all listed companies and companies with more than 1,000 shareholders. This makes the voting process more convenient and accessible for shareholders, and ensures greater participation in the decision-making process of a corporate.
2. Proxy Voting [Section-105 r/w Rule 19 of Companies (Management and Administration) Rules, 2014]:
The Act allows shareholders to appoint a proxy to attend and vote on their behalf in a general meeting. This ensures that even if a shareholder is unable to attend a meeting, their vote can still be casted.
3. Postal Ballot [Section-110 r/w Rule 22 of Companies (Management and Administration) Rules, 2014]:
The Act provides for casting of vote via postal ballot, which enables shareholders to vote on resolutions without physically attending a meeting. This is particularly useful for companies with a large number of shareholders or for resolutions that require a high quorum.
4. Right to demand Poll [Section 109 r/w Rule 21 of Companies (Management and Administration) Rules, 2014]:
Shareholders have the right to demand Poll before the result is declared by the Chairman of the meeting. The requisite number of members can ask for the votes to be counted by a Poll.
5. Shareholders’ right to inspect [Section-119, 171 r/w Rule 14 of Companies (Management and Administration) Rules, 2014]:
The Act gives shareholders the right to inspect company documents and records, including the minutes of meetings, financial statements, auditor reports, and statutory registers. This ensures transparency and accountability in the company’s operations.
6. Shareholders’ right to call a general meeting [Section-100 r/w Rule 17 of Companies (Management and Administration) Rules, 2014]:
The Act allows shareholders to call a general meeting if the company’s board of directors fails to do so. This ensures that shareholders have a say in the company’s decision-making process.
7. Shareholders’ right to propose resolutions [Section-111 of the Companies Act, 2013]:
The Act allows shareholders to propose resolutions for consideration at a general meeting. This gives shareholders the opportunity to put forward their views and influence the company’s decisions.
8. Right to participate in general meetings [Section-96 of the Companies Act, 2013]:
Companies are required to hold annual general meetings (AGMs) where shareholders can meet and vote on important issues. Companies must also provide notice of these meetings and allow shareholders to participate and vote remotely.
9. Board Accountability [Section-166 of the Companies Act, 2013]:
The board of directors is accountable to shareholders and must act in the best interests of the company and its stakeholders. Directors must disclose conflicts of interest and ensure that they are acting in accordance with the law.
10. Independent Directors [Regulation 25 of SEBI (LODR) Regulations, 2015]:
The SEBI Listing Regulations require companies to have a minimum number of independent directors on their board, who are expected to act in the best interests of the company and its shareholders. Independent directors are also required to attend meetings and provide independent views on key decisions.
11. Related-Party Transactions [Section 188 of the Companies Act, 2013, Regulation 23 SEBI (LODR) Regulations, 2015]:
Companies are required to disclose related-party transactions and obtain the approval of the audit committee and the board of directors before entering into such transactions. Shareholders are also given the right to vote on related-party transactions.
12. Whistle Blower Policy [Regulation 22 of SEBI (LODR) Regulations, 2015]:
Companies are required to have an active whistle-blower policy that encourages employees and directors to report unethical behaviour. The policy must also provide for adequate safeguards against victimization of persons who come forward to report unethical practices taking place in the organization.
In summary, the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 has introduced several provisions that promote shareholder democracy and protect the interests of shareholders in India. These provisions give shareholders more power and rights, and ensure greater transparency and accountability in the company’s operations and that the corporates run in the best interests of their shareholders and other stakeholders.
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