In recent years, shareholder rights have taken center stage in India’s corporate governance landscape. With the rise of shareholder activism, investors increasingly leverage their rights to influence corporate decisions. This activism includes various tactics, such as voting against board proposals and engaging in public campaigns, enabling shareholders to hold companies accountable.

The Companies Act, 2013, serves as a crucial legal foundation for empowering shareholders. Sections 100 to 102 grant them the right to attend and vote at general meetings. Additionally, Section 115 allows shareholders to propose resolutions. These provisions create a robust framework for shareholder activism, enabling investors to advocate for changes aligned with their interests.

Recent developments underscore the growing impact of shareholder activism in India. For instance, in 2021, shareholders of Eicher Motors Ltd. successfully blocked a proposed pay hike for the managing director. This incident highlights their ability to influence executive compensation, an essential shareholder right. Similarly, the landmark case involving Jindal Poly Films Ltd. saw minority shareholders initiate India’s first class-action suit, emphasising the assertiveness of investors.

Proxy battles are gaining traction as shareholders challenge management nominees for board seats. These battles focus on critical issues like executive compensation, board composition, and strategic direction. The rise of institutional investors has intensified momentum behind proxy battles. These investors often hold significant stakes and seek to influence corporate governance.

The Companies Act, 2013, and SEBI regulations govern proxy battles, ensuring that shareholders can vote on significant corporate matters. These regulations promote transparency and fair treatment of all shareholders, creating a conducive environment for activism.

Activist shareholders often employ various activism strategies to engage with company management. These strategies can include private meetings, public statements, and collaborative efforts aimed at addressing specific issues. In some cases, shareholders may resort to litigation to enforce their rights or challenge corporate decisions. They can utilise various provisions of the Companies Act, 2013, and SEBI regulations.

Public campaigns are another effective strategy. Activists garner support from other shareholders and the broader public through media outreach and social media initiatives. They may also partner with advocacy groups to amplify their voices.

Conclusion :
In conclusion, shareholder activism is reshaping corporate governance in India. As investors increasingly exercise their shareholder rights, the dynamics between management and shareholders will continue to evolve. Companies that recognise and adapt to this trend will be better positioned to thrive in a competitive and scrutinised environment.

Positive Developments:
Strengthened Legal Framework: The Companies Act, 2013 and SEBI (LODR) Regulations, 2015 empower shareholders with rights such as voting on appointments, remuneration, mergers, and related party transactions.
The concept of class action suits under Section 245 of the Companies Act allows shareholders to hold management accountable.
Institutional Investor Participation: Institutional investors like LIC, mutual funds, and proxy advisory firms (e.g., IiAS, SES) increasingly scrutinize company decisions.
Examples include investor opposition to excessive executive compensation and questionable related party transactions (e.g., Infosys and Eicher Motors cases).
Transparency and Disclosure: Improved disclosure norms and e-voting mechanisms have facilitated greater participation by minority shareholders in AGMs and EGMs.
Challenges and Limitations: Promoter Dominance: Many Indian companies have high promoter shareholding, which dilutes the influence of minority shareholders. Even institutional votes are often overridden by controlling shareholders.
Low Retail Investor Participation: A large number of small shareholders remain uninformed or disengaged, limiting collective action.
Lack of Awareness and Tools: Minority shareholders often lack the legal knowledge, resources, or unity to effectively challenge board decisions.
Regulatory Gaps: Although the law allows shareholder activism, implementation and enforcement remain inconsistent.
Conclusion: While shareholder activism in India has shown positive momentum, especially through institutional influence and improved regulatory backing, its effectiveness is still evolving. Promoter control, lack of investor awareness, and regulatory enforcement remain barriers. For activism to become truly effective, there must be greater investor education, stronger institutional engagement, and robust legal enforcement to ensure management accountability and protect minority interests.