IndexIntroductionTypes of Corporate AbuseBreach of Fiduciary DutyOppressionFalsification of Financial DataSecurities Market ManipulationCorporate CorruptionMoney LaunderingRemedies for Corporate AbuseJurisprudence: Ritchie vs RupeConclusionIntroductionCorporate abuse means changing or concealing sensitive information and it makes them seem normal. There are various modus operandi for committing corporate abuses, such as incorrect information in the prospectus, manipulation of books of accounts, breach of fiduciary duties vested in directors, tax evasion, insider trading etc. There can be several reasons given for which companies commit fraud such as earning more counterfeit money, creating a false image of the company for the market scenario and misleading government authorities for tax evasion. Multi-layered fraud cases involve the abuse of power and economic exploitation by companies, which are the culmination of events directed by companies to steal money and benefits from the public and government using fraudulent techniques. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get Original EssayThe Companies Act, 2013, is the legislation that focuses on issues relating to corporate fraud. Fraud in relation to the affairs of a company or any body corporate as defined in S.447 of the Companies Act 2013, includes any act, omission, concealment of any fact or abuse of position committed by any person or any other person with the connivance in in any way, with intent to deceive, obtain unfair advantage or damage the interests of the company or its shareholders or its creditors or any other person, whether or not there is unfair gain or unfair loss . To constitute fraud an act must be limited to acts committed by a contracting party with the intention of deceiving another party or his agent or inducing him to enter into a contract. Fraud, which vitiates the contract, must have a connection with the acts of the contracting parties. This definition highlights the precondition necessary to prove the intention of the person who committed the fraud. If that person willfully committed fraud, they will be punished. Here person means himself or his agent. Acts that include fraud are wrong suggestions or concealment of facts or false promises or any fraudulent act to deceive others. Types of Corporate Abuses There are various types of abuses committed in the corporate world; It is not easy to limit corporate abuses due to the emergence of corporations, other ways corporate abuses have also emerged. Some of the corporate abuses have been mentioned below as follows: Breach of Fiduciary Duty In a corporation, the fiduciary duty of the board of directors refers to the highest standard of care. Fiduciary duty means unique responsibilities related to monitoring, distribution, administration, etc., along with the company's reputation. A company director must act in a manner that is in the best interests of the company and its members and in accordance with the provisions of the law. Breach of fiduciary duty not only affects the corporation, but also affects the members of the corporation and society at large. Duties can be breached in two ways: Commits blatant acts that constitute mismanagement. No action can also be interpreted as an inability to lead. Exception: "Business Judgment Rule" which protects a business director who acts in good faith and without corrupt motives. In Texas, the business judgment rule is generally believed to protect non-interested directorsfrom liability unless the action complained of is ultra vires or tainted by fraud or self-dealing. Gross negligence on the part of directors is not protected by the business judgment rule. Furthermore, a director who abdicates responsibilities or similarly fails to exercise any judgment cannot use the business judgment rule to avoid liability. Oppression The term oppression is not defined in the Companies Act and it is for the court to decide on the facts and circumstances of the case whether there is oppression or mismanagement of minorities or not. The word oppression in common language indicates a situation or an act or a case of oppression or submission to cruel or unjust impositions or restrictions. The oppression may have passed or continue. Generally there is oppression of the minority, but there can also be oppression of the majority. According to Lord Keith, “Oppression means a lack of morality and propriety in the affairs of society which may be prejudicial to some members of society. The term mismanagement refers to the process or practice of managing ineptly, incompetently, or dishonestly. Falsifying financial data Falsifying financial data means creating account entries and misrepresenting the company's financial situation. It includes transactions that falsely show increased profits or the concealment of losses, the concealment of transactions that should have been regulated by the government, insider trading, and the reporting of misleading asset values. They were falsifying financial data and reporting misleading profits. Securities Market Manipulation Companies make huge profits when they manipulate the market through a security, it can be through currency or by manipulating a commodity. These assets are created to generate an investor's interest, but because of this the state and the individual can both face losses. Incorrect and misleading information about a security is posted, disseminated, or published to increase or decrease a company's stock price. Huge ripple effects can be faced by the stock market within minutes of manipulation and can even lead to markets crashing. Corporate Corruption This is an exchange of monetary benefits between private/public individuals to win a deal. Multinational corporations pay governments to secure their business. Generally developing and underdeveloped countries are involved in these activities, which results in loss of revenue, loss of opportunities, illicit flow of money, unemployment along with loss of trade and reputation. Money Laundering Money laundering is the process by which companies hide illegally made money by making it appear legitimate. The goal of this white collar crime is to hide illegal activity by evading taxes and making money. Money laundering affects everyone because it affects our tax base. In cases of CSR, if a company is required to spend, say, 10 million rupees on CSR, it issues a check to a trust operating in the education, healthcare or healthcare sector. none of the activities specified by the government. The trust, after deducting its commission, discreetly returns the money in cash to the officials or promoters, instantly turning 10 million rupees of white money into black. Some of the abuses of corporate power by management identified by Marshall B. Clinard are as follows: Abuse of the democratic process: This is evidenced by the efforts of multinational corporations to enlist the political process to their advantage through large financial contributions to political parties or leaders. This can be done both legally and illegally.Abuse of workers and the local community: This occurs through the closure of plants through lockouts, etc., without any warning. Stakeholder abuse: This occurs by completely ignoring stakeholder claims in the corporate accountability process. Consumer abuse: Various methods are used to deceive consumers, for example through price fixing, misleading or deceptive advertising. Environmental abuse: occurs through widespread pollution of air, water and soil, improper disposal of hazardous waste. Third world abuse: is committed by selling products already restricted or even banned in third world countries, corrupting public officials, violating host country tax and other laws. Remedies for Corporate Abuse There are various remedies available in case of corporate abuse and it keeps evolving from time to time as per the demand of the situation. Some of the remedies available for corporate abuse are as follows: In case of breach of fiduciary duties: Injunction: The director will be suspended from acting to prevent the company or business from suffering from his improper acts. Withdrawal: This remedy may be sought in the situation where the director has failed to disclose his personal interest in the company with which a transaction is being or is contemplated being made in the future. The company has the power to cancel such a transaction on the basis that the director has not disclosed his conflicting interests in the transaction the company is undertaking. Damages: anyone who is involved in the violation of their duties will be held liable towards the company, for whatever reason they have violated their duties both jointly and individually. Disciplinary proceedings: A person who has breached his or her fiduciary duties may be disciplined, for example in the case of a director of a company, removal of the director(s). In cases of oppression: All members of a company who complain that the affairs of the company are being conducted” in an oppressive manner may approach the court and the court shall grant such relief, which should be in the best interests of the members of the company and will also govern the future management of corporate affairs. Some of the remedies are reduction of share capital, restriction on transfer or allotment of shares, purchase of shares or interests of the members of the company by the other members or the company, etc. In the event of misappropriation of funds or financial statements, a common remedy may require payment of compensation for financial losses; other remedies may include a rewrite of the financial agreement and/or a replacement of the person managing the funds. Case law: Ritchie vs. RupeRupe Investment Corporation (RIC) was a company including four directors Paula Dennard, who chaired the board; Dallas Gordon Rupe, III (Buddy), who was Dennard's brother; Lee Ritchie, who was president of the RIC; and Dennis Lutes, a lawyer whose clients included RIC, Dennard and his family. Paula Dennard and Buddy Rupe were the descendants of RIC's founder and Ritchie is the descendant of one of its first owners. Three different family trusts collectively owned approximately 72% of RIC's voting shares. Dennard, Ritchie and Lutes served as trustees of those trusts and therefore collectively controlled a majority of RIC's voting power. Ritchie and his family also directly owned an additional 10% of the shares, increasing their combined voting power to 82%. Buddy directly owned the remaining 18%. There was no shareholders' agreement. Ann Rupe joined the family as Buddy's second wife. Gordon's will created the.