Author: Mahak Jain
UPES
To the Point
The right allows shareholders holding at least one-tenth of the paid-up share capital carrying voting rights to impel the board to convene an EGM to bandy and address pressing matters. This provision is especially significant in the terrain of listed companies, where power i constantly concentrated in the hands of promoters, leading to implicit marginalization of nage voices. The right to supplicate an EGM functions as an essential check on the arbitrary exercise of power by the board of directors and acts as a legal tool to ensure that the corporate operation remains responsible to all shareholders, not just the controlling bloc. This composition critically analyzes the strategic co-ection of Section 100 in enhancing board responsibility. It examines how onage shareholders are transitioning from being dormant stakeholders to active actors in market vision. By exploring legal, judicial, and nonsupervisory features, the discussion seeks to estimate the effectiveness of this provision as a pillar of shareholder activism in India’s capital ecosystem.
Use of Legal Jargon
The legal analysis in this composition is grounded i foundational marketable law doctrines and on illuminative justice. Pivotal generalities explored include Fiduciary Duty. Directors of a company are bound by a fiduciary obligation to act in the best interests of the company and its shareholders. Any deviation from this standard, especially conduct that aims to benefit many stakeholders at the expense of others, can give rise to a breach of duty claim. Nonage Oppression Under marketable law, conduct by mature shareholders that unfairly prejudices nonage interests can be challenged under the doctrine of oppression and mismanagement. The Companies Act, 2013 provides statutory safeguards under Sections 241 – 244 in this regard. Requesting Power Section 100 grants shareholders with at least 10 percent of voting capital the right to importunity an EGM. This right is procedural but important, enabling shareholders to formally question the board’s opinions. Commercial Republic: The notion that marketable opinions should reflect the operative will of shareholders, regardless of shareholding patterns. Section 100 serves as a popular counterpoise to promoter dominance. saSalutaryower. This generality addresses cases where voting rights or shareholding are exercised by persons other than the registered holders, constantly applicable i deputy activism or institutional shareholder voting. Ultra Vires Acts Any action by the board that falls outside the compass of their authority under the company’s memorandum and articles of association, or contrary to shareholder judgments, is ultra vires and fairly challengeable. Stakeholder Justice This evolving legal model recognizes that companies have scores not just to shareholders but also to a broader class of stakeholders, including workers, creditors, and the community. This terrain enriches the debate on board responsibility. Structuring these legal principles, the composition frames Section 100 not simply as a procedural provision, but as a substantial vehicle for administering marketable discipline.
The Proof
Empirical data and case- grcase- groundedsevidence reveal that while Section 100 is not yet considerably invoked, its eventual. In practice, marketable boards, especially wit promoter- led- led realities, have constantly failed to convene EGMs requested by onage shareholders, citing procedural fashions or interpreting “ valid occasion ” hardly. Yet, courts and bars have constantly upheld the sanctity of right, emphasizing that once the threshold demand is met, the board has no discretion to deny the meeting. In recent times, India has seen a gradual increase in nonage-led attempts to use EGMs to initiate functional changes, oppose related-party deals, or demand independent board reviews. These trends indicate that shareholder activism is no longer limited to institutional investors but is spreading among high-net-worth individuals, retail shareholders, and strategic investors who seek transparency and responsibility. SEBI’s nonsupervisory ecosystem has also contributed to empowering shareholders. Recent endorsements calling for enhanced ESGs, e-voting, and stewardship canons for institutional investors have i lusively fostered a terrain conducive to nonage activism. The judicial recognition of shareholders’ participatory rights in opinions analogous to IC v. Attendants Ltd. and Tata Sons v. Cyrus Mistry underscores the indigenous and legal equivalency of shareholder interventions under Section 100. stStillstructural impediments remain. These include limited awareness among retail shareholders, procedural detainments, legal scrutiny, and the dominance of settled boards. The success of Section 100 as a tool for board responsibility will depend on sustained legal reform, visionary enforcement, and the evolution of a rights-alive shareholder culture.
Abstract
The part of nonage shareholders in marketable governance has assumed new confines with the enactment of the Companies Act, 2013. At the heart of this etamorphosis lies Section 100, which grants qualifying shareholders the statutory authority to demand an Extraordinary General Meeting( EGM) to address pressing arketable enterprises. This provision acts as a critical corrective to pr agonist control, particularly in listed companies where governance practices have historically lis favoredvor of maturity. This composition undertakes a detailed legal and strategic analysis of Section 100, mapping its doctrinal underpinnings, judicial interpretation, and practical deployment in real-world difficulties. It argues that while the provision remains underutilized, its significance as a shareholder activism tool is steadily growing, particularly in the background of a rising capital request and increasingly inactive investor community. Through doctrinal sense, case law illustration, and policy commentary, the composition explores how onage shareholder activism enabled through Section 10 can serve as a potent instrument to bolster board responsibility and reshape the outlines of marketable democracy in India.
Case Laws
1. National Textile Workers’ Union v. P.R. Ramakrishnan (1983 AIR 75)
In this landmark judgment, the Supreme Court held that workers, as stakeholders, have a right to be heard during company winding-up proceedings. The Court emphasized that corporate governance should be participatory, recognizing the role of non-shareholding stakeholders in influencing corporate decisions. Although the case focused on workers, it laid the conceptual groundwork for inclusive corporate governance and reinforced the idea that all stakeholders, including minority shareholders, deserve representation in major corporate actions.
2. Darius Rutton Kavasmaneck v. Gharda Chemicals Ltd. & Ors (2014) 16 SCC 240
This case involved a dispute over the transfer of shares at an allegedly undervalued rate, which minority shareholders claimed was oppressive and prejudicial. The Supreme Court ruled in favor of the minority, recognizing their right to challenge the actions of the majority when such actions are unfair or detrimental. The decision reinforced the principle that corporate decisions must comply with the fiduciary duties of fairness, transparency, and equity, especially when minority interests are at stake.
3. LIC v. Escorts Ltd., (1986 AIR 1370)
LIC, as a substantial shareholder, attempted to requisition an EGM to remove certain directors, but the move was resisted by the company’s board. The Supreme Court upheld LIC’s statutory right under the Companies Act to requisition a meeting, rejecting the board’s arguments. This case is a cornerstone judgment affirming that shareholders, irrespective of their identity or motivation, are entitled to exercise their legal rights under company law. It serves as a judicial endorsement of the principles now codified in Section 100 of the 2013 Act.
4. Tata Sons Pvt. Ltd. v. Cyrus Investments Pvt. Ltd. (2021)
This corporate governance case arose from the ousting of Cyrus Mistry as Executive Chairman of Tata Sons. His investment firms alleged minority oppression and mismanagement. While the NCLAT had earlier reinstated Mistry, the Supreme Court reversed the decision, holding that the removal was within the board’s power. However, the case brought national attention to the need for stronger legal mechanisms for minority shareholders to influence boardroom decisions, indirectly underscoring the potential utility of Section 100 for accountability in promoter-dominated companies.
Main Analysis
1. Understanding Section 100 of the Companies Act, 2013
Section 100 grants the Board of Directors the power to convene an Extraordinary General Meeting (EGM) when necessary. Crucially, it mandates the board to call an EGM upon a valid requisition by members holding at least one-tenth of the paid-up share capital carrying voting rights.
Key Features:
Applicable to all companies, with listed companies often falling under heightened scrutiny.
If the Board fails to call the EGM within 21 days of requisition, shareholders may themselves convene it within 3 months.
The meeting must discuss matters stated in the requisition notice and cannot be diluted by the Board.
This provision democratizes corporate decision-making by allowing significant (yet minority) stakeholders to challenge or influence the Board.
2. The Rationale Behind Empowering Minority Shareholders
India’s capital markets are increasingly globalized, and corporate governance norms are shifting towards enhanced transparency and accountability. Section 100 addresses the historical problem of board entrenchment—a phenomenon where directors act in a manner that entrenches their control, often at the cost of minority shareholders.
Legal Rationale:
Aligns with Article 14 (Right to Equality) and Article 19(1)(c) (Right to Association) of the Constitution.
Reinforces the fiduciary duties of directors under Section 166 of the Companies Act.
Complements SEBI’s corporate governance frameworks like LODR Regulations.
3. Trends in Minority Shareholder Activism
Minority shareholder activism in India is no longer restricted to institutional investors. Retail investors, proxy advisory firms, and foreign portfolio investors (FPIs) are actively participating in governance.
Examples: Shareholder pushbacks in companies like Fortis Healthcare and Infosys.
Despite these, the actual invocation of Section 100 remains rare, indicating procedural or awareness gaps.
4. Challenges to Effective Utilization of Section 100
While Section 100 appears empowering on paper, several practical and structural challenges dilute its efficacy:
Threshold Difficulty: Acquiring 10% of the paid-up capital remains high for fragmented minority groups.
Board Resistance: Boards often ignore requisitions or delay them under procedural pretexts.
Lack of Awareness: Retail investors are not always aware of their rights or mechanisms.
Cost Burden: Requisitionists bear the cost of meetings if the Board fails to act.
Judicial Delays: Relief under NCLT is slow, discouraging urgent shareholder action.
5. Comparative Jurisprudence
In the UK, Section 303 of the Companies Act 2006 provides similar rights to shareholders, requiring a 5% shareholding for EGM requisition. The U.S. model, under the SEC’s proxy access framework, provides more latitude in raising shareholder concerns.
In India The 10% threshold places India somewhere between conservative models like Germany and progressive ones like the UK or the U.S., but with fewer institutional support mechanisms.
6. SEBI’s Role in Supporting Shareholder Rights
SEBI’s Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015 supplement Section 100 by:
Requiring shareholder approval for key decisions.
Mandating disclosure of voting results.
Regulating related party transactions and independent director appointments.
Yet, SEBI cannot enforce Section 100 directly—it remains the purview of the Companies Act.
7. Board Accountability in the Indian Context
India’s promoter-driven companies often view boards as extensions of promoter interests. Independent directors, meant to safeguard broader interests, sometimes lack real autonomy.
Key Points:
Fiduciary duties (Section 166) are often undermined by informal influences.
Board inertia in acting on minority concerns leads to erosion of trust.
Section 100 offers a rare statutory lever to break this inertia and demand explanations.
8. Reform Recommendations
To improve the functionality and impact of Section 100, the following reforms are suggested:
Reduce Threshold: Bringing it down to 5% to match international best practices.
Digital Requisition System: Facilitate e-filing and real-time shareholder communication.
Mandatory Board Response: Introduce penalties for unjustified delays in convening meetings.
Cost Sharing: Shift the burden of EGM costs to the company in cases of board inaction.
Investor Education: SEBI and MCA should promote awareness of statutory rights through targeted campaigns.
Conclusion
Section 100 of the Companies Act, 2013 symbolizes a progressive step towards participatory governance in Indian corporate law. It serves as a statutory conduit for minority shareholders to assert their rights and ensure board accountability. However, its latent potential remains hamstrung by practical barriers, legal inertia, and structural constraints. With reform, robust enforcement, and increased shareholder awareness, Section 100 could emerge as a pivotal tool in reshaping India’s corporate governance landscape—one that is more inclusive, responsive, and democratic.
FAQS
Q1: What is the minimum requirement to call an EGM under Section 100?
A: Shareholders holding at least 10% of the paid-up share capital carrying voting rights can requisition an EGM.
Q2: Can the Board refuse to call an EGM even after a valid requisition?
A: No. If a valid requisition is made, the Board is statutorily bound to call the meeting within 21 days. Failure to do so allows the requisitionists to call the meeting themselves.
Q3: How does Section 100 enhance board accountability?
A: It compels the board to respond to shareholder concerns, especially in matters like mismanagement, related-party transactions, or poor governance, by forcing a deliberation via EGM.
Q4: What are the limitations of Section 100?
A: High shareholding threshold, potential board non-cooperation, and procedural complexity reduce its practical use.
Q5: Has Section 100 been invoked successfully in the past?
A: Though rare, there have been instances, like in LIC v. Escorts, where similar provisions were successfully invoked. However, post-2013, there’s limited public data on its usage in listed companies.
References
Companies Act, 2013: Section 100, Section 166, Sections 241–244
Article 14 and Article 19(1)(c) of the Indian Constitution
National Textile Workers’ Union v. P.R. Ramakrishnan, AIR 1983 SC 75
https://indiankanoon.org/doc/1569870/
Darius Rutton Kavasmaneck v. Gharda Chemicals Ltd. & Ors, (2014) 16 SCC 240
https://www.casemine.com/judgement/in/56e13337607dba3896624001
LIC v. Escorts Ltd., AIR 1986 SC 1370
https://indiankanoon.org/doc/730804/
Tata Sons Pvt. Ltd. v. Cyrus Investments Pvt. Ltd., (2021) 9 SCC 1
https://blog.ipleaders.in/tata-sons-v-cyrus-mistry-case-analysis/
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
SEBI’s Stewardship Code for Mutual Funds and All Categories of AIFs (2019)
https://www.sebi.gov.in/legal/circulars/dec-2019/stewardship-code-for-all-mutual-funds-and-all-categories-of-aifs-in-relation-to-their-investment-in-listed-equities_45451.html
UK Companies Act, 2006 – Section 303
US SEC Proxy Access Rules