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Troubleshooting for retail investors

Aug 23, 2000

When one invests in the equity markets, one dreams of capital appreciation, regular incomes in the form of dividends, bonuses and so on. Cut to the world of reality and we find that the Indian investor community is one harried lot. Forget capital appreciation, investors sometimes are locked in heated battles with the companies they own shares in. The complaints range from non-receipt of dividends, bad deliveries, problems in share transfers, loss of share certificates, non-credit of bonuses etc. So what’s the recourse for the common retail investor in such cases?

We spoke to some experts who deal with investor grievances day in, day out. About 85-90% of the complaints received by the Bombay Stock Exchange (BSE) are about share non-transfer and dividend non-payments. From the conversations we had with officials at BSE, we formulated a list or thumb rules, which equip you to take a better recourse.

Thumb rules

  • Your first step should always be to write to the company and get a clarification from them as to what went wrong. Sometimes, the company does have a logical explanation to the issue concerned. For example, BSE receives a lot of complaints regarding dividend non-payment or a lesser dividend than what was proposed at the shareholder’s AGM. But it has happened in many cases that the dividend has been revoked or not approved later.

  • Incase the company doesn’t reply or the company’s reply doesn’t satisfy you, approach the exchange on which the company is listed (i.e. BSE or NSE), the Department of Company Affairs (DCA) and the Registrar of Companies of the region where the company is registered.

  • Experts say that it is better to write to them all at one time. The reason being that all these institutions have a hold on the companies’ and can add collective pressure, which is likely to force the company to either give a reasonable explanation or to take quick remedial actions.

  • Added to the above, if the company or the Registrar of Companies doesn’t respond after two reminders, you should write to The Securities Exchange Board of India (SEBI) about your grievance.

  • Do not think that all this letter writing will yield no results. It is important to remember that all these institutions maintain records on the company’s investor friendliness. They actually file all these complaints against the erring company. The company’s are scared of them and do not want to invite their ire. For example, the stock exchanges on which they are listed have the right to blacklist them. BSE has developed a ‘Z’ category shares, under which the regular erring companies are placed on a watch, which has a negative impact on the stock prices of these companies. The exchanges also hold the right to delist the company as a last resort.

  • You can also sue the company and demand damages. One can either file the complaint with the Company Law Board or the consumer court. But one must weigh the pros and cons of taking the battle to court. For one, India’s legal system is slow and time consuming. Secondly, court battles are costly affairs and are neither advisable nor practicable for small retail investors’.

  • Always keep photocopies of all your correspondence with the company and the institutions you are writing to for recourse and file it. This will act as a handy reference tool and an important proof in case the dispute gets prolonged.

  • At all times, please remember that as a shareholder you have the right to information, the right to your dividends, bonuses, all at the right time. Do not desist from staking a claim to your rights.

To avoid all this hassles in the first place, it is advisable to read about the companies before you invest in them. Always prefer companies with a reputed management and a good track record. Avoid fly by night operators, unless you are absolutely sure of their business propositions. Remember, prevention is always better than cure.

Sample complaint form from SEBI

Download a sample of the complaint form of BSE

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