ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

A+| A| A-

Institutional Intervention in Company Affairs

Institutional Intervention in Company Affairs K T Merchant TILL a couple of years ago, financial institutions like the HC did not take, any interest in the management of companies in which they held shares. The managements had their way as the Board of Directors mostly consisted of their own nominees, all belonging to the small 'charmed circle', there being hardly any really 'independent' directors. In rare cases, where there were 'independent' directors, they were in a helpless minority and quite ineffective. Thus, the interests of the small shareholders were neither represented nor safeguarded. The Company Law Board was and is supposed to be a watchdog and is expected to act in their interests but it interpreted the law narrowly, took a technical view of things and more often than not rubber-stamped the decisions of the management All this, coupled with the general apathy of the vast majority of scattered shareholders and the strong entrenched position of managements which always armed themselves with a large number of proxies, enabled managements to ride roughshod over opposition, when there was any. Directors nominated by the government, banks and institutions which had given loans to the companies concerned sat on the Boards for the specific purpose of safeguarding the repayment of the loans and did not bother about any other aspect of management. As one of the leading institutional lenders told this author, they were not there to rnanage the company for others.

Dear Reader,

To continue reading, become a subscriber.

Explore our attractive subscription offers.

Click here

Back to Top