How to deal with a delisted Ltd Co which pays hi salaries & Royalty but no dividend to indian shareholders?

Question

This is a Indian subsidiary of a well known Auto Part producer. Its shares traded on Indian Stock exchanges were bought back/ acquired as a prelude to delisting. It gives very high salaries and still higher salary hikes, a fairly high level of loyalty to its parent foreign company, but no dividend has been declared so far in order to "Conserve Profits". The dividend payable to the parent co is apparently covered in the Royalty and by not declaring dividend it avoids Dividend Tax payable to the Central Govt.

Answer 1

A question like that you have to address with the corporations board of directors. They are the ones who approve dividends and salary increases. Unfortunately if the executives are also the directors, then you may never see a dividend regardless of a high profit ratio. If you have invested in this company it may be worth getting out of it. Most (American) companies try to make themselves attractive by paying higher dividends to their investors. Doing this attracts investors and corporations have larger capital to grow. Unfortunately in developing countries such as India and China where capitalism is still in it's primary stages, the value in paying higher dividends is not yet recognized. It may take years for these executive members to recognize that their profits may be short lived if investors start pulling out their money.

Answer 2

I feel that it is only matter of time before the MNC sub buys back all the shares with the indian shareholders [if it is permitted] and makes itself fully owned. I hope they give fair valuation for remaining shares when it is bought back, which takes care of any un declared dividends.

Indians need to understand the capitalist logic in investing in future. This freedom in investing and doing what so ever they would prefer [entry/exit] within the gamut of Indian law in fact attracts fdi into a country and there would be many more such experiences in future with FDI targets having been set on a very high trajectory in 2007 as well.

Answer 3

You can meet a Advocate who is an expert in Companies Matters, having a proven track record of CLB cases.

The remedy is available under Section 397 & 398 of Companies Act 1956. You can complain, stating that such act of the board of directors is amounting to MISMANAGEMENT and suppression of MINORITY INTERESTS. You can argue with your points. If convinced the authority will compensate.

If not you will get back Face Value + Share of Reserves & surpluses (i.e. equal to the networth of the share) + suit expenses, if any, under best judgement policy vide sec. 404 to 419 of Companies Act 1956.

However, you need patience and time to win this case.