Volume : II, Issue : III, December - 2012

An overview of progressive activism– the class action suit.

Parimala. V

Abstract :

One of the essential features of an incorporated association is the separation of ownership and management. Conceptually even though the shareholders are considered the owners of the company there are merely spectators to the actions of the Directors. Shareholder activism is a term used to explain the active participation of the shareholders to fight against the erroneous acts of the management. The Companies Bill, 2011 proposes to ing in many developments in the regulations governing the Indian Corporate sector that aim towards enhancing the protection of stakeholder rights and interests. One such development is the inclusion of the clause on Class action which if implemented will be an effective tool in the hands of the minority shareholders against the oppressive practices of the Management. Under Clause 245 of the proposed bill, a class action can be initiated by such specified number of member or members, depositor or depositors or any class of them, as the case may be, may, if they are of the opinion that the management or conduct of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its members or depositors. In the backdrop of the highly debated, reported and analysed Satyam Case, an entity that suffered silently is the Company’s small shareholders whose wealth has been eroded within a span of days with no fault of theirs. Small investors in India awakened to the concept on Class action when their American Counter made the company agree to pay $125 million (over Rs 625 crore) in settlement due to a strong class action framework in the US. A widely used redressal mechanism in the US and the UK, it has now found place in the Indian regulatory framework.The paper aims to understand the implications of the class action and the mechanism through which it can be implemented. It will be an exploratory study focusing on the issues relating to small shareholders and how far the tool of class action with help in fostering shareholder activism.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Parimala.V An overview of progressive activism- the class action suit. Indian Journal of Applied Research, Vol.II, Issue.III December 2012

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