Deal Alert: Indian Angel Network invests in Inthree
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Here’s the main problem: the government is forcing a parent company to take on the liability of a subsidiary company, ignoring the fact the subsidiary was formed as a separate entity precisely so that the parent company’s liability is limited to the extent of its investment in the firm.
... who’s to say that the dues of investors in NSEL’s products serve a greater public interest than the interests of FTIL’s minority shareholders? An argument is being made by NSEL investors that about 85% of FTIL’s shares are held by a few large shareholders and the over 55,000 other shareholders hold less than 15% in the company. But can it be concluded that the interests of these small shareholders don’t matter?
...Of course, all this is not to say that NSEL’s investors shouldn’t be paid back their dues. But two wrongs don’t make a right. If the government is keen on the recovery of the dues of NSEL investors, it must act tough against NSEL’s management, the FTIL directors who were involved in the running of the spot exchange, including Shah, as well as the defaulting companies who owe the exchange large sums of money.
...In both the FTIL and DLF cases, fundamental principles about corporate limited liability, the rights of minority shareholders and property rights appear to have been violated. Unless corrected, they may well deal a blow to investor sentiment. It will very probably now be up to the courts to uphold these basic rules.