Class action suits: a new protection for minority rights

R. Vigneshwaran
Student of 3rd Year B.A.LL.B (Hons.), Tamil Nadu National Law school


Abstract

The protection of the minority shareholders within the domain of corporate activity constitutes one of the most difficult problems of contemporary company law. The aim must be to strike a balance between the effective control of the company and the interests of the small individual shareholders. In the words of the Palmer: “A proper balance of the rights of majority and minority shareholder’s is essential for the smooth functioning of the company”. The modern Companies Act, therefore, contain a large number of provisions for the protection of interests of investors in companies. The aim of these provisions is to require those who control the affairs of the company to exercise their powers according to certain principles of natural justice and fair play. However, the reality is that, most of the times minority shareholders’ voices are unheard and they are suppressed many a times. Therefore, the idea of Class Action suit in par with the oppression suits (1956 Companies Act) was brought in the Companies Act, 2013. The concept of a class action suit emerged in United States of America in the early 18th Century. The biggest object behind the “Class Action Suit” is, providing protection to the minority shareholder, members and creditors to file an application before the NCLT on behalf of the all members/ creditors in the event that the management of company was being conducted in a manner prejudicial to the interests of the company or its members or creditors, assumed greater importance as a redressal mechanism separate from the traditional oppression and mismanagement application. Finally, this article will analyse as to what is the peculiar difference between the Oppression suit and Class Action suit and why the idea of class action suit was brought in the 2013, Amendment.

Keywords: Class action, Companies Act 2013, Minority shareholders

Preferred Citation

R. Vigneshwaran, Class action suits: a new protection for minority rights, The Lex-Warrier: Online Law Journal (2018) 3, pp. 101 – 113, ISSN (O): 2319-8338

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