Rights of a shareholder

As a shareholder, a person is entitled to certain rights with respect to the company. Some of them are:

139. Appointment of auditors (Right to appoint the company auditor)

136. Right of member to copies of audited financial statement

123. Declaration of dividend. (Right to receive dividends)
47. Voting rights (Right to vote)
100. Calling of extraordinary general meeting (Right to call for a General Meeting)
56. Transfer and transmission of securities (Right to transfer of shares)
171. Members ‘right to inspect. — (1) The register kept under sub-section (1) of section 170
(Right to inspect the registers and books of the company)
Protection of minority shareholders
Minority shareholders are those who do not enjoy much in terms of powers when it comes to the
management of the company. Since the introduction of the Companies Act, 2013, the rights of the
minority shareholders have been given importance.
• Right to apply to the Board in case of oppression or mismanagement
• Right to institute a class action suit against the company and the auditors
• The requirement to appoint Small Shareholder Director
• Where most shareholders sell their shares, then the minority right must also be included. This
concept is termed as Piggy Backing.

Remedies against Oppression, Mismanagement and Prejudice

241. Application to Tribunal for relief in cases of oppression, etc.

242. Powers of Tribunal.
243. Consequence of termination or modification of certain agreements.
244. Right to apply under section 241.
245. Class action.
246. Application of certain provisions to proceedings under section 241 or section 245.

 Mismanagement:
The term ‘mismanagement’ generally refers to gross mismanagement of a company’s affairs and acts
that are prejudicial to its interest. The 2013 Act extended the scope to also include a change that is
prejudicial to the shareholders or any class thereof. It may include
(a) diversion of public money for unknown/ unwanted purposes, affecting grossly the financial state
of the company
(b) gross negligence in managing the affairs, and (c) inaction.[22]
  Numerical threshold:

Minimum requirement: -
244. Right to apply under section 241
(a) members holding at least 10% of the “issued share capital of the company”, or 1/10 th of its total
number of members, whichever is less; or, where the company does not have a share capital, not less
than 1/5th of the total number of its members
 Prejudicial Acts:

A prejudicial act refers to an act that adversely affects the interests of petitioning shareholders
 Oppression:

Conducting the company’s affairs in a manner prejudicial to public interest or interests of the
company or in a manner oppressive to any member or members amounts to oppression