India scores perfect 10 in protecting shareholders’ rights

New Delhi: India has scored a ‘perfect 10′ in terms of protecting shareholders’ rights, even as advanced economies like the US, UK, Singapore and New Zealand have failed to get this top-billing in the World Bank’s latest ‘ease of doing business’ report.

While India has been ranked 100th overall in terms of protecting minority investors, it has got a much higher 4th position for protecting minority investors, which officials attributed to several reforms undertaken by the capital market regulator Sebi (Securities and Exchange Board of India).

Within the area of ‘protecting minority investors’, India scored 10/10 for protection of shareholders’ rights — as against 4/10 for the US, 5/10 for Australia, 7/10 each for the UK, Singapore and New Zealand.

Other areas, which are part of ‘protecting minority investors’ are corporate transparency, disclosure and ownership and control, director liability and shareholder suits.

India has scored 8 each on corporate transparency, disclosure and ownership and control parameters and a 7 each on director liability and shareholder suits.

“India strengthened minority investor protections by increasing the remedies available in cases of prejudicial transactions between interested parties. This reform applies to both Delhi and Mumbai,” the report noted.

The top five countries — New Zealand, Singapore, Denmark, South Korea and Hong Kong and — in the ease of doing business index have scored in the range of 6 to 7 in the area of protecting rights of shareholders.

India ranked at 100th place in ease of doing business, while the US has bagged the sixth position, the UK (seventh spot) and Australia (14th rank)

Sebi’s contribution has mainly been areas of disclosures, shareholders’ rights and corporate transparency among others.

To safeguard minority investor, Sebi has taken several reform initiatives including taking prior approval of the audit committee necessary for related party transactions.

Among others, Sebi’s listing rules cast responsibility on board of directors and key managerial personnel to disclose to the board whether they, directly, indirectly, or on behalf of third parties, have a material interest in any transaction affecting the listed entity.