Aditi Sharma explains what the introduction of entrenchment provisions means for minority shareholder rights
The dictionary definition of entrenchment includes establishing an attitude, habit or belief so firmly that change is difficult or unlikely.
Entrenchment is not defined under the Companies Act, 2013, but the spirit of section 5(3) of the act suggests that the idea may have been borrowed from the UK Companies Act 2006, where entrenchment was designed to provide statutory limits on majority rule in the context of modifying the articles of association (AOA) of a company. Such a provision did not find a place in India’s Companies Act, 1956.
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Aditi Sharma is a manager in the corporate legal group at ICICI Bank in Mumbai. The views expressed in this article are personal and do not reflect the official position of ICICI Bank.