The Section 245 Derivative Action Framework: Building Litigation Defenses Through Board Process Documentation

The Business Driver: Why Derivative Suits Are Increasing

Minority shareholders in Indian listed companies increasingly use Section 245 derivative actions to challenge board decisions that allegedly harmed the company particularly RPT approvals, capital allocation decisions, and governance lapses. The plaintiff bar has developed expertise in these claims, and institutional investors sometimes support derivative litigation as means of enforcing governance accountability.

For boards and management, this creates an environment where decisions made years ago become subject to hostile judicial scrutiny, with discovery revealing internal deliberations and plaintiff experts characterising reasonable business judgments as breaches of fiduciary duty. The legal defense capability required has evolved substantially.