Shareholders
comes with different background and perspective, where having disagreement over
trivial points to matters related to the management of the company is a common
issue now days. Out of such disagreement, there are always few issues which are
failed to be resolved amicably and convert into a legal dispute which not only
affect the shareholders but also paralyzed the management and day to day
business affairs of the company. From time to time, we have saw emergence of
such shareholders dispute at regular intervals, such as McDonald and Vikram Bakshi,
Tata and Mistry and recent ongoing infamous shareholders dispute among Kishore Biyani,
Future Group & Amazon; Invesco Group and Zee etc.
Shareholders
dispute is different from the contractual disputes among two opposite parties,
as the shareholder dispute is not only limited to the balance of rights among
the disputed shareholders but it impacts the overall business of the company.
The dispute between McDonald and Mr. Vikram Bakshi led to closure of majority
of outlets by McDonald and disrupted the entire business model. McDonald is
still yet to recover the losses and get it’s market position back even after
the settlement happened two years ago in 2019 after a six year long litigation.
The
eight long year shareholders dispute between Tatas and Mistry finally come to
an end after hon’ble Supreme Court upholds Tatas actions. Summary of dispute
and details are below for a better understanding:
a. December
2012:- Cyrus Mistry was appointed a chairman of Tata Sons to head the group;
b. October
2016:- Cyrus Mistry was ousted as chairman of Tata Sons;
c. December
2016:- SP Group and other shareholders owning 18.4% shares in Tata Sons ( these
firms are in support/owned by Cyrus Mistry) approached NCLT against ousting of
Cyrus Mistry as chairman of Tata Sons;
d. July
2018:- NCLT rejected shareholders plea for removal of Cyrus Mistry as chairman
of Tata Sons;
e. August
2018:- SP Group challenged NCLT’s order in NCLAT
f. December
2019:- NCLAT set asides NCLT order and restores Cyrus Mistry on Tata Sons’
board;
g. January
2020:- Tata Sons approached Supreme Court, which stay he NCLAT order;
h. September
2020:-Supreme Court restrain SP Group from pledging or transferring any Tata
Sons’ shares;
i. March
2021:- Supreme Court set aside NCLAT order and allowed all the prayers of Tata
Sons.
Few
of the most common reasons of disagreement among the shareholders which led to dispute
are listed below:
a. a. Differences
over management, direction of the business, governance and operational issues;
b. b. Breach
of fiduciary duties and misconduct;
c. c. Breach
of shareholders agreement and / or articles of association;
d. d. Discrimination
of minority shareholder/s;
e. e. Conflict
over roles and responsibilities in the company.
If
such disagreement between shareholders arises which can escalate into a
dispute, some immediate actions should be taken to protect the interest are
listed below:
a. i. To
review the existing shareholders agreement and the memorandum & articles of
the company in order to identify the provisions which a party may have breached
or is their any contravention to the governing byelaws of the company;
b. ii. To
resolve the disagreement in amicable way and address the grievances of the aggrieved
party, which may not be serious at the moment but can lead to potential
dispute;
c. iii. Take
proper legal advice and formulate a
complete strategy at the commencement of the shareholder dispute which includes
to define the key objectives and the concessions which the party is ready to offer
to the other party for resolution;
d. iv. To
understand your rights and liabilities, which may arise with the escalation of
the dispute. The party may need to analyze the impact on the management and
directors who are been appointed by the shareholders in dispute;
e. v. To
call for all shareholders meeting and present the facts of the case for discussion
among all the shareholders and to find out a balanced resolution for the
disagreement among two or more shareholders at dispute in the company;
f. vi. To
explore for early settlement and make reasonable offer to aggrieved shareholder
which includes but not limited to provide an exit to the other party from the
company with minimum disruption on the day to day business of the company;
g. vii. In
general, the shareholders agreement provides for resolution mechanism under
which informal negotiation or through arbitration or litigation. Even in
absence of any such provision in the shareholders agreement, the Companies Act,
2013 vests National Company Law Tribunal to adjudicate any dispute among the
shareholders.
h. Depending
upon the nature and gravity of dispute, the shareholders need to initiate
necessary legal action within specified time period at appropriate forum.
If
you are in a shareholder dispute, and need to learn more about shareholder
dispute resolution, you may connect with us at admin@equicorplegal.com
/ 8448824659