Minority Squeeze-Outs Of Indian Shareholders In Companies Abroad During Incorporation

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Ananya Rakheja, O.P Jindal Global University

ABSTRACT

Incorporation is a critical phase in the life of any company, that entails pivotal decisions impacting both majority and minority shareholders. Minority stakeholders, particularly those invested in foreign enterprises, encounter various risks, notably the looming threat of being forced out. This minority squeeze-out scenario unfolds when dominant shareholders or a parent entity coerce minority shareholders into selling their shares, typically at undervalued prices. Such occurrences transpire through diverse channels like mergers, compelled buyouts, or share amalgamations. The article delves into the obstacles confronted by Indian minority shareholders in international investments, specifically during the incorporation phase of companies. With Indian enterprises expanding their global presence, minority shareholders confront the risk of unfair squeeze-out situations orchestrated by majority stakeholders, particularly in foreign jurisdictions with weaker legal safeguards compared to India. Despite the protective measures stipulated in the Companies Act, 2013, including Sections 2361, 2412, and 2423, Indian shareholders investing in foreign companies encounter additional hurdles due to diverse legal systems, regulatory constraints, and corporate governance norms. Furthermore, it scrutinizes significant legal precedents such as Tata Sons v. NTT Docomo4, highlighting the enforcement difficulties minority shareholders encounter in foreign arenas.

MINORITY SQUEEZE-OUTS OF INDIAN SHAREHOLDERS IN COMPANIES ABROAD DURING INCORPORATION.pdf

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