Oppression and Mismanagement the Notion of Rule of Majority

Abstract

The Prevention of Oppression and Mismanagement1 is a fundamental clause in the Companies Act that seeks to protect the interests of minority shareholders and prohibits firm management from abusing authority. However, although being a major clause of the Companies Act2, oppression and mismanagement3 are not defined. Because the meaning of mismanagement or oppression prevention might be broad, these phrases must be construed based on the facts of each instance. However, if we try to define Mismanagement, it relates to practises that violate the Memorandum of Association, Articles of Association, or other legislative rules, resulting in mismanagement inside the organisation. This provision empowers shareholders to sue the company’s management or majority owners in court if they think their rights are being violated or the business is being mishandled. The purpose of this article is to examine the portions of the Companies Act’s Prevention of Oppression and Mismanagement Act4, which is found in Chapter XVI of the Companies Act5, and contains its purposes, scope, and implementation as found in sections 241 to 246. It discusses the many behaviours that may constitute oppression and mismanagement, as well as how minority shareholders can seek redress through the legal system. The study also highlights the role of the Company Law Board and the National Company Law Tribunal6 in resolving oppression and mismanagement issues, as well as other particular directives such as A member’s shares or interest are purchased by another member, resulting in a capital decrease. Transfer/allotment of shares is restricted. Contracts between the company and the MD, or any other director or administration, may be cancelled or set aside as the tribunal thinks necessary. Any further agreements between the firm and anyone other than those stated above shall be dissolved. Only with proper notification and the approval of the affected party may the agreement be cancelled. Putting aside any transfer/delivery/payment/execution or other act pertaining to property made by or against the corporation during a period of three months of the date of the request under this section, which would be constituted fraudulent preference if done by or against the individual.7 Overall, this paper provides a thorough examination of the Companies Act’s Prevention of Oppression and Mismanagement provision and its significance in protecting minority shareholders’ interests and encouraging effective corporate governance.