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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Concept of Governance in Professional Managed Company and Promoters Driven Company

Ganga Textiles Ltd is promoter-driven. The promoter holds 70% and proposes a resolution that benefits promoter-group entities. Minority shareholders fear the resolution will pass automatically. Which governance feature best protects the minorities in principle?

Requiring approval by a majority of non-interested minority shareholders for related-party transactions best protects minorities. It stops the dominant promoter from outvoting others on matters in which it has an interest, giving independent shareholders a real say over transactions benefiting promoter-group entities.

  1. ARequiring approval by a majority of the minority (non-interested) shareholders for related-party transactionsCorrect
  2. BAllowing promoters to vote on their own related-party transactions
  3. CRemoving the audit committee
  4. DLimiting minority shareholders' right to information

Explanation

A majority-of-minority approval prevents interested promoters from deciding their own transactions, shielding minorities from outvoting by a dominant holder. The other options remove safeguards or let interested parties decide, increasing the risk of abuse.

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