Company Secretary and Law: class action suits are going to be a reality

Company Secretary and Law: class action suits are going to be a reality: "Companies Bill 2009 which seeks to replace the present company law is going to bring a new class of suits; class action suits! Clause 216 is..."

class action suits are going to be a reality

Companies Bill 2009 which seeks to replace the present company law is going to bring a new class of suits; class action suits! Clause 216 is going to create shareholder activism; with judicial activism we are going to see yet another chapter in the corporate legal history. Shareholders particularly minority shareholders will be entitled to join in suits commenced to attack corporate frauds! Representative action could trigger winding up of companies; change in management; takeovers! and even Government takeover!! This will bring best board practices! ICSI has timed it so nicely by bringing out a secretarial standard on board practices! Governance will improve; double speak will reduce; lest hidden agenda may get exposed! 

Corporate Powers of Board of Directors are derived from charter documents

Directors derive their corporate powers only when they act collectively as the Board of Directors. Unless otherwise covenanted due to any provision of the Companies Act or of any agreeement or the articles of association, decisions in a board meeting are taken by a majority vote. Individual directors do not enjoy any powers unless powers for managing the day-to-day affairs of the company or powers to execute any specific transaction or contract are conferred upon them by a resolution of the board of directors or by terms of their appointment or through instruments such as a power of attorney. Thus directors may be all powerful. But doing anything that the company itself could not have done lands them in trouble. While directors derive and exercise their powers in this manner, there is no need for any specific provision to show them their duties. They owe fiduciary duties to act in the best interests of the company in good faith for bonafide puproses. They are liable not only for statutory defaults but also for their acts of omission and commission! If they make personal gains by using corporate opportunities, they are liable to make good the their company the losses caused by their such acts!

corporatelawmadesimple: Validity of Acts of Directors - Defacto Doctrine C...

corporatelawmadesimple: Validity of Acts of Directors - Defacto Doctrine C...: "In order to be valid, the corporate power must be exercised by the board of directors which is validly constituted. Defects discovered in th..."

Validity of Acts of Directors - Defacto Doctrine Comes to Rescue Subject to Conditions!

In order to be valid, the corporate power must be exercised by the board of directors which is validly constituted. Defects discovered in the appointment / re-appointment of directors could be cured. Acts of directors done in good faith would not get invalidated merely because of subsequent discovery of defective appointment. This law is based on the defacto doctrine contained in Section 291 of the Companies Act, 1956. A shareholder or director who discovers the defect and notifies the concerned, does not need to do anything more than mere but proper intimation in order to stop the mischief from continuing. In order to derive the benefit of this doctrine, it must be proved [when any act of a directors is challenged in a court of law] that (i) the act of the director under challenge was done in good faith for the benefit of the company and (ii) when the impugned act was done, the director in question and the other directors who allowed / approved the impugned act, were not aware of the defect discovered.

Why Ministry of Corporate Affairs should introduce Easy Exit Scheme?

All of you in corporate practice would have noticed Easy Exit Scheme, 2011 introduced by the Ministry of Corporate Affairs to pave way for weeding out defunct companies. Previously when this scheme was introduced, several companies had exited. Similarly now defunct companies could become active to apply for an exit. One of the benefits of this scheme is that the applicant comapnies do not need to update all accounts and returns and  other documents which such companies might have omitted to file. As such it is quite possible that several squared up transactions do not get reported and several contraventions might not get detected at all. For instance if in Year 1 there is a loan transaction carried out in perfect violation of Section 295 of the Companies Act, 1956 and in Year 2 the same has been squared by an entry and in Year 3 [let us say 2011] they file a Statement of Account and get an honourable exit (officially), it is nothing 'closing eyes where they are supposed to open'. In this era of scams, should MCA be introducing schemes such as EES 2011 without proper safeguards? Would it not be prudent for professional certifications as regards 'no violation' in the past three years at least? If complaints are not there, could that indicate 'all is well"? Are we not having enough experience of shareholders filing complaints under Section 235 / 273 / 397/ 398 and other provisions even after 8 to 10 years upon coming to know of issues? Can there be an exit otherwise than through a proper winding up in the case of companies with assets and liabilities? How is the EES, 2011 valid when it allows companies with assets and liabities to exit? What is the validity of the indemnity of one or two directors? Will there be any verification of their means and credibility so as to say that their indemnity would stand the test at the relevant time? Are we not hearing many a stories of closure of companies floated by Kings through such schemes which could have been 'pass through' for various transactions? It is time we wake up and make the administration shake up!    

corporatelawmadesimple: benefits of compounding of offences under the Comp...

corporatelawmadesimple: benefits of compounding of offences under the Comp...: "A prosecution of the offence would not be launched in a Criminal Court by filing a criminal complaint whereby the hassles of appearing befor..."