In a significant move, the Corporate Affairs Ministry has notified the thresholds for filing class action lawsuits. With this, Investors can now seek class action against companies.
About:
What is it? Class action is a provision aimed at providing a redressal mechanism for small and minority investors.
When can it be filed? Under Section 245 of the Companies Act, investors can file a class action suit in case they feel that the management or conduct of the affairs of a company are prejudicial to their interests.
Thresholds:
An application for class action can be filed by a member or members representing 5% per cent of the total members of a company.
It can also be done by 100 members of a company, whichever is less. The same criteria will also be applicable for depositors of deposit-taking companies.
In case of an unlisted company, a member or members holding at least 5% of the issued share capital can file for class action. For listed companies, this threshold would be 2%.
Underlying rules for new threshold: This was done by amending the National Company Law Tribunal Rules 2016 under the Companies Act, 2013.
Significance: With the notification of the thresholds, investors can now file class action lawsuits. This is a huge step in terms of redressal mechanism for small and minority shareholders.
Way ahead: The ministry is also readying a scheme to provide financial assistance to minority investors filing class action lawsuits under the companies law.
Dear Student,
You have still not entered your mailing address. Please enter the address where all the study materials will be sent to you. (If applicable).
