DefinePK

Abstract

This article undertakes a comprehensive analysis of Pakistan's corporate structure, with a specific emphasis on the safeguards for minority shareholders outlined in the Companies Act 2017. Within the corporate sphere, instances of directors withsubstantial control or major shareholders exploiting their capital for personal gain are regrettably prevalent. This exploitative conduct disproportionately affects minority shareholders, rendering them prone to undue coercion by the majority. The consequences of such exploitation are multifaceted, ranging from disruptions in the normal course of corporate activities to the initiation of litigation and the stimulating of tensions among shareholders, culminating in substantial financial burdens. Existing remedial measures, while well-intentioned, are beset by limitations that contribute to worsening the situation. Recognizing this imperative, the article posits that the recourse of derivative action stands as a pivotal and hitherto underutilized remedy, offering a more robust shield for shareholders. Significantly, the current form of the Companies Act of 2017 fails to acknowledge derivative action as a viable remedy for safeguarding the rights of minority shareholders. In light of this deficiency, the article advocates for legislative amendments to strengthen company law, thereby supplementing shareholders' enforcement capabilities and establishing a framework for enhanced corporate accountability within the Pakistani context.