The Raymond family drama has had a significant impact on minority shareholders of the company, leaving them vulnerable. The stock has dropped more than 17% following Gautam Singhania’s wife Nawaz Modi’s allegations of assault against him. Despite Singhania’s assurance to the board that Raymond would continue to function smoothly, the situation remains tense.
This case is just one of several instances where minority shareholders, who own less than 50% of the stock, are affected disputes between board and family members. Other ongoing cases of family disputes impacting companies include pharma company Hikal and Finolex Cables.
Experts suggest that shareholders are limited in their options, as they must decide whether to sell their stocks as they are decreasing in value or hold onto them for an indefinite period. Deepak Jasani, head of retail research at HDFC Securities, emphasizes that the decision rests on the company’s ongoing performance, as well as the potential for the dispute to be quickly resolved.
According to Delhi-based corporate lawyer Anuroop Omkar, minority shareholders have limited ability to act in such cases, as they are low in the pecking order even in insolvency situations. Although the Company Act 2013 contains provisions to protect minority rights, it may not be applicable in the Raymond case, as it is primarily a personal dispute.
Several high-profile corporate battles, such as the family dispute between Mukesh Ambani and Anil Ambani in 2004, have led to significant impact on shareholder value. This has left minority shareholders with little recourse, as they must rely on the board and independent directors to act on their behalf, according to Shriram Subramanian, founder & managing director of proxy advisory firm InGovern.
Although legal recourse is an option for minority shareholders, it comes at a cost and may not always be in their best long-term interests. It also carries the risk of a significant drop in share prices. Therefore, it is crucial for shareholders to stay informed about a company’s corporate governance track record and carefully consider their options in the face of internal disputes.
In conclusion, minority shareholders face a challenging situation as they navigate the impact of boardroom and family battles on their investments. The ongoing Raymond family drama is just one example of the vulnerability of minority shareholders during such disputes. It remains to be seen how the situation will unfold and the potential long-term consequences for all stakeholders involved.