Thresholds for class action lawsuits against companies notified

The Ministry of Corporate Affairs (MCA) has notified the thresholds for filing a class action suit – a redressal mechanism – for small and minority investors.  

On Wednesday, the ministry made amendments to the National Company Law Tribunal Rules 2016 under the Companies Act, 2013. The thresholds notified investors will now be able to file class action lawsuits.

Investors can file this class action under section 245 of the Companies Act in case they feel that the management has conducted his affairs in a manner that is prejudicial to their interests.

The application must be filed by a member or members representing 5% of the total members of a company or can be submitted by 100 members of a company, whichever is less. The same will be applicable for depositors of deposit-taking companies.

For a member of listed companies, the threshold to file a class action suit is 2% per. In the case of unlisted companies, a member or members with a minimum of 5% of the issued share capital can file for a class action suit.

The investor can also file a class action suit in case the statutory auditors have been callous and negligent, endorsing falsified statements.

Currently, the ministry is also preparing a scheme to provide financial assistance to minority investors filing such class action lawsuits.

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