If there are oppression and mismanagement in a Company, then the Section 241-246 of the ComPANies Act, 2013, effectively deals with these kinds of problems. There is corporate democracy only if the concepts of majority rule is followed. This law of the majority originated in the rule of Foss v Harbottle. This law said that the individual shareholders have no cause of action in law for any wrongdoing by the corporation and the action brought about in respect of such losses shall be brought either by the corporation itself or through a derivative action.
This majority rule often may time suppresses minority rights. Thus in order to achieve a balance the rights and interests of the small/minorities shareholders, the government has laid the rules under the Indian Company Law of 2013. Below are mentioned the acts which have been identified as oppressive acts and mismanagement acts.
When we see various judicial reports, some of the acts which seem like those of the oppression acts are mentioned below. These are:
If there is no calling of a general meeting and if the shareholders are not spoken of the discussions an are kept in dark.
If there is no maintenance of statutory records and if the affairs of the Company are not in accordance with the ComPANies Act, 2013.
If a member is deprived of the right to a dividend.
If there is a refusal to register transmission under will.
If there is a particular section of shareholders who are getting benefitted by the issuance of further shares.
If there is no distribution of the amount of compensation amonGST all the members of the firm, which has been received on the nationalisation of business of Company among members, wherever it is required
The acts which have been categorised as mismanagement acts have been listed as follow:
If there has been serious infighting between directors of the entity.
If the Board of Directors is illegal and is still being continued.
If the bank accounts were operated by unauthorized people.
If the directors take no serious action in order to recover amounts those have been thieved.
If the directors continue to work in the office even after their expiry of the term of directors.
If there is a sale of assets without the compliance of the ComPANies Act, at lower prices.
Violation of Memorandum.
Under the violation of statutory provisions and/or those of Articles.
If the Company is doomed to trade unprofitably.