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Industry bodies need to protect minority shareholders: MCA

The ministry of corporate affairs has also called for measures aimed at increasing awareness among investors. (Photo: iStock) — The ministry of corporate affairs has also called for measures aimed at increasing awareness among investors. **(Photo: iStock)**

1 min read . Updated: 26 Sep 2021, 05:09 PM IST Livemint

Institutes such as ICAI and ICSI have been urged to help nudge shareholders towards constructive decision-making

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NEW DELHI : New Delhi: Professional institutes such as the Institute of Chartered Accountants of India (ICAI) and Institute of Company Secretaries of India (ICSI) as well as industry bodies need to play a key role in protecting the interests of minority shareholders, the ministry of corporate affairs said in a review of the corporate sector.

Corporate affairs secretary Rajesh Verma said one of the most essential requirements of a sound corporate governance system is the effective protection of shareholders’ rights so that they can actively participate and constructively influence corporate decision-making.

“The Investor Education and Protection Fund (IEPF), professional institutes, industry chambers and investor associations all need to play an important role in this direction," Verma said in the review. He also argued for creating awareness in the investor community in this regard.

The emphasis on protection of minority interests comes at a time when the country has seen a boom in the participation of households in the equity markets, especially during the pandemic. The ministry is emphasising on protection of minority shareholder interests as market sentiment heavily depends on the safeguards built into the law and on how independent directors perform in board’s decision making.

The law mandates inclusion of independent directors on various committees of the board of directors including audit committee and stakeholder relationship committees. In order to take legal action against the management of a company for alleged mismanagement and oppression, 10% of the shareholders need to come together.

Verma’s emphasis on the role of professional institutes in protecting minority interests assumes significance given that company secretaries, chartered accountants and cost accountants are also covered by their respective self-regulatory bodies’ disciplinary mechanism. Company secretaries play a key role in businesses meeting their compliance requirements.

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