Shareholders shafted with planned changes to the Companies Act
Share buybacks are no small matter. In parliamentary hearings on amendments to the Companies Act, a proposal to gouge out a crucial section granting appraisal rights spells trouble for minority shareholders. Without being able to demand “fair value” for their shares, insiders can easily hoover up large blocks of the company’s shares even at a heavily discounted market price. Or they can use a spiked share price to repurchase the shares of an insider. No explanation has been given for the removal of the safeguards other than an earlier reference that “one of the prime categories of policy objectives sought to be addressed in the proposed amendments is the ease of doing business and conversely the reduction of unnecessary burdens”. Let’s see what happens.