India: The Rise and Rise of Shareholder Activism

Last Updated: 5 December 2017
Article by Anuj Shah and Praneetha Vasan

Most Read Contributor in India, August 2019


Around the world, there has been a considerable increase in shareholder activism in recent years. October 2017 saw a win for shareholder activists, 40 North and White Tale, when they forced the management of Clariant AG to call off Clariant's merger with Huntsman Corporation, since they believed that the merger would expose Clariant to Hunstman's debt and volatility. This was followed by the widely publicised and deadlocked battle of Nelson Peltz, a hedge fund manager of Trian Partners, nominating himself for appointment as a director in Procter & Gamble ("P&G") in early November 2017.

Shareholder Activism – the Indian landscape

In line with global trends, India is also seeing a rise in shareholder activism. An early instance of shareholder activism in India was the rejection of an increase in remuneration of certain key executives of Tata Motors by its shareholders in July 2014. However, when put to vote for a second time in January 2015, shareholders voted in favour of the increase in remuneration.  More recently, in June 2017, shareholders of Raymond Ltd rejected the sale of JK House at an allegedly below market price to the promoters of Raymond Ltd.

The above-mentioned triumphs for investors have encouraged others to take an active part in the management of companies. In July 2017, Unifi Capital Private Limited ("Unifi") sought the appointment of a director representing small shareholders on the board of Alembic Limited. Similarly, in September 2017, certain shareholders of Religare Enterprises Ltd ("Religare") including India Horizon Fund filed a petition before the NCLT to prohibit Religare from making an investment of around INR 500 crore in its subsidiary. The shareholders of Religare also sought to oust the board of directors on the ground of frequent and unexplained write-offs by the company and its subsidiaries. The jury is still out on these matters!

There have also been a few notable instances when certain shareholders took an active interest in the management but failed to obtain majority vote of the shareholders. For instance, in September 2017, Florintree Advisors Private Limited ("Florintree") moved the proposal to appoint a nominee of 'small shareholders' on the board of directors of PTC India Limited. However, the majority shareholders did not support this proposal. Similarly, in the proposed merger of HDFC Standard Life Insurance Company Limited with Max Financial Services Limited, certain proxy firms (shareholders of Max Financial) had urged shareholders to vote against the payment of non-compete fee to the promoters since the rationale behind such payment was not clear. However, this plea did not go through and 65% of shareholders voted for the payment of the non-compete fee. The merger was eventually called off due to different reasons. Though the above two instances may appear to be a failure for institutional activist investors, it shows the beginning of a trend of shareholder activism, which, is on a rise.

Does the law back shareholders in India?

Various legislations in India provide for several rights and remedies to minority shareholders in India. Some of the more commonly used ones under the Companies Act 2013 ("Act") are as follows:

  • Board involvement: Under the Act, small shareholders can seek the appointment of a minority shareholder representative on the board of a listed company. Similarly, through an ordinary resolution i.e., simple majority votes cast in favour, directors can also be removed by shareholders.
  • Class Action: The Act also grants shareholders the right to institute class action suits if they believe that the company's management or affairs are being conducted in a manner which is prejudicial to the interests of the company or its shareholders. Such a petition against a company would require the support of at least 100 shareholders or 10% of the total number of shareholders, whichever is lower, or any shareholder holding at least 10% of the shareholding of that company. Since the National Company Law Tribunal was only established in June 2016 before which such class action suits are to be filed, there have not been many instances of class action suits.
  • Shareholder Approval: Further, under the Act, several statutory matters require prior approval of majority of shareholders including, related party transactions (as discussed in the JK House sale to the promoters of Raymond Ltd), payment of non-compete fee (as discussed in the Max Financial instance), investments and borrowings beyond specified thresholds (as discussed in the Religare instance), executive remuneration beyond prescribed thresholds (as discussed in the Tata Motors instance), sale of an undertaking of the company, amendment of the constitutional documents of the company, and issue of new shares.

Another important right granted to shareholders under the Act but not commonly used by shareholders is the right to call for general meetings. Shareholders who collectively own 10% of the voting paid-up capital can require the board of directors to convene a general meeting of the shareholders.

The SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 ("Listing Regulations") is another legislation, which provides various rights and remedies to shareholders of listed companies. Under these regulations, each listed company is mandated to constitute a stakeholder's relationship committee whose role is to, inter alia, consider and resolve grievances of security holders of listed companies including complaints related to transfer of shares, non-receipt of annual report and non-receipt of declared dividends. The Listing Regulations also require listed companies to, inter alia, (i) provide electronic voting facility to shareholders to enable wider shareholder engagement; and (ii) mandatorily disclose events such as outcome of board meetings, revision in ratings, corporate acquisitions and re-structuring events / information, and events which are material in the opinion of the board of directors. Another remedy available to shareholders is the SEBI Complaints Redressal System ("SCORES"). SCORES is a platform that allows investors to file complaints against listed companies or intermediaries which are registered with SEBI online or physically. However, this complaint can be filed only when an investor has first approached the company/intermediary and has not received a satisfactory response.

Apart from the commonly used legal rights and remedies, shareholders may also raise concerns with their investee companies by way of open letters.

The way forward for shareholders

While shareholders in India have only seen a few triumphs in their proxy fights against companies, we are hopeful that these instances will encourage other investors to take an active role in the management of companies. A SEBI-appointed committee has recently submitted a report on corporate governance in India which, inter alia, recommends penalties for auditors in case of lapses, immunity to whistleblowers, stricter regulations for independent directors, webcasting of shareholder meetings and introduction of a stewardship code to monitor the engagement of the institutional investors with their investee companies. These recommendations, once implemented, will act as a catalyst in increasing the wave of investor activism in India.

The way forward for companies

With shareholder activism on the rise in India and globally, companies in India have the opportunity to absorb and implement best practices used by companies around the world to maintain credibility with their shareholders and stakeholders. The most vital technique that companies must use is to engage in dialogue with investors not only at the time a vote from the shareholder is required, but consistently to ensure the effectiveness of their communication with investors. Secondly, board composition is extremely essential to capture the trust of shareholders. For example, having at least more than one director with industry experience on the board and ensuring continual education and evaluation of directors are other methods companies across the world believe are essential. Recruiting and retaining highly qualified directors who will remain independent while at the same time balance the pressure of work loan and the heat from shareholders is crucial. Thirdly, it is important for companies to have a strategic plan for the long-term future since today's shareholders take a keen interest in how companies plan to grow. Lastly, a professional and ethical "tone at the top" is crucial to build the trust of shareholders. With the rising tide of shareholder activism, it is incumbent on India Inc. to pick the global best practices in this regard and provide a boost to the credibility of India Inc. as a preferred destination for investments. 

The content of this document do not necessarily reflect the views/position of Khaitan & Co but remain solely those of the author(s). For any further queries or follow up please contact Khaitan & Co at

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Practice Guides
by Mondaq Advice Centres
Relevancy Powered by MondaqAI
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions