You can complaint the same to company law board first and later approach NCLT for the same
Minority Shareholder rights
Hi I have been holding shares of a Small Limited company which is into Life sciences space. It is a small company with annual turnover of not more than 3 Crs. Promoter of the company was known to me , hence i invested when they issued shares 5 years ago at face value Rs 10 / share. The total number of share holders is around 30 to 40 with the 4 directors who started the company holding majority of shares (around 60%). Recently i came to know that there are management issues prevailing the company and the managing director has asked other 3 directors to leave and the managing director newly appointed his wife and brother as directors and bought over the shares from the relieving directors. I asked for balance sheet and P&L of the company as shareholder over email, but they are not willing to give and asked me to visit their office to see balance sheet and P&L statement, for which i cannot travel. After which, for my clarification, i downloaded companies' financial statements from MCA and found that in their filling the auditor has made observations that company is in violation of section 185 and Section 197 of companies act. The managing director (majority shareholder) has been drawing a salary of 10 to 12 lakhs per annum while the profit of the company is less than 2 lakhs per annum and now with recent appointment of his wife and brother as directors, he and his family drawing salary way more than profit leaving very little for shareholders. When i asked about these details, managing director does not provide answers and details. Also, they have not called me to any AGM meetings and all the decisions are taken unanimosly by the managing director itself. As a shareholder where how do i impose my rights in the company in this context. Where to complain if i dont get supportive response from the company management. Can i take legal action if the managing director still does not repond.
Asked 4 years ago in Business Law
14 Answers
1. For any type of financial & management irregularities in functioning of a registered Co., a written complaint can be lodged with the district "Registrar of Companies" (ROC), by annexing all the irrelevant documentary evidences and request for investigation & prosecution.
2. For financial fraud, file complaint before the district EOW (Police dept.), by annexing all the irrelevant documentary evidences and request for investigation & prosecution.
You can complain to ROC against company failed to provide you audited statement of accounts , failure to issue notice to shareholders for calling AGM , misappropriation of funds by MD
2) also take legal proceedings against for oppression and mismanagement before Tribunal seek removal of MD etc
If you alone hold at least one tenth of the paid up share capital carrying voting right, or with other members collectively hold such portion of share capital , then you alone or collectively as the case may be, shall have a right to call for extra ordinary meeting for dealing with any issue and can apply to tribunal to cancel any variation not consented by such member alone or collectively .
Otherwise as individual holding less than ten percent share shall not have any right to change the variation if any passed by resolution in general meeting.
For non compliance of other statutory obligations you can complain to ROC.
Lodge your complaint and grievances with MCA.
Hi
Yes ofcource you can complaint against the direcor.
Iwould also suggest you to file a police complaint.
That would create the real pressure.
Dear Sir/Madam,
You are suggested to serve a legal Notice to the directors of the company and if needful not done by the company, file the complaint against the company and its managing Director/directors before the registrar of the company.
Sir/Madam
You can file a petition for oppression and mismanagement of the company. You are a minority shareholder, filing such a petition is within your right. This petition will lie in the Bangalore Bench of the National Company Law Tribunal (I am assuming that the company is incorporated in Bangalore, with its registered office in Bangalore).
Minority shareholders have the right to benefit from such events as receiving dividends and selling shares for profit. However, these rights can be suppressed by those in control. For example, the company directors can decide not to pay dividends or not to purchase shares from shareholders
Minority shareholders have certain legal rights. Their minority shareholder rights are determined by the law of the state where the company was incorporated.
Under most states’ corporation laws, the majority shareholders owe a fiduciary duty to the minority shareholders. This means that majority shareholders must deal with minority shareholders with candor, honesty, good faith, loyalty, and fairness. Minority shareholders have the right to expect company officers and directors to act in the company’s best interests and in compliance with the shareholders agreement. Ways that majority shareholders can breach this fiduciary duty is when they form other companies to compete directly with the corporation, pay themselves high salaries, or sell stock of the company on terms favorable only to themselves.
If a minority shareholder believes that corporate management has acted with intent to defraud any person, or exercised power in a manner that is oppressive, unfairly prejudicial, or that unfairly disregards the minority shareholder’s interest (often reducing the value of the minority’s interest), the minority shareholder may initiate a lawsuit against the majority shareholder(s) and seek an appropriate remedy.
Taking steps to protect your rights as a minority shareholder is important. A failed attempt to assert minority shareholder rights can result in significant expense to the unsuccessful minority shareholder. To make sure you protect your rights and your financial interests, you need the expertise of a seasoned attorney. An attorney with expertise in shareholder litigation and dispute resolution can evaluate your case, and help you plan and implement a successful strategy.
you can file complaint to ROC Or Ministry of Corporate Affairs..
1. Companies Act, 2013 deals with the situations where minority shareholders rights have been protected.
2. Under Companies Act, 2013, the relief from the oppression and mismanagement has been provided under Section 241-246 where the relief can be sought from the tribunal in case of mismanagement and oppression through section 244(1) which provides the right to apply to tribunal with the same minority limit mentioned in Companies Act, 1956, but however, the tribunal, while exercising discretionary powers, may allow any numbers of shareholders and to be considered as minority.
3. Further, under the Section 245, Companies Act, 2013, the new concept of class action has been introduced which was non-existent in Companies Act, 1956 wherein it provides for class action suits to be instituted against the company as well as against the auditors of the company.
Yes you can take action against MD.
You can lodge complaint with the Registrar of Companies (ROC) against the Company as it did not provide you with audited balance sheet and P&L account details and also it failed to issue notice of AGM to the shareholders.
You have an option to take action for oppression & mismanagement by the Board.
Further, you can also seek removal of MD and reconstitution of the Board with chosen people.
You need to take help of a practicing Company Secretary / Advocate dealing in Company matters.
1. First you should send a legal notice to directors of company for providing you all the financial reports of company as its your right and warn them for legal actions if they doesnt provide you required documents.
2. File suit against directors of company in CAT for taking action against them for doing fraud with share holders of company.
File application to company law board about mismanagement and oppression of minority shareholder for releif.
