Kalpesh Veer
Quick Summary
Meaning of the Entrenchment: The Companies Act, 2013 not defined the Entrenchment term but it introduced in it. The Companies Act, 1956 not contain the Entrenchment in it. In the Companies Act, 1956 there was nothing specific provision like entrenchment, the act mostly depends on the judicial dec
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FAQ :
Entrenchment refers to the addition of provisions in a company's Articles of Association that make specific clauses more difficult, or even impossible, to amend.
Entrenchment was introduced in the Companies Act, 2013. It was not a feature of the Companies Act, 1956.
Entrenchment can be implemented either at the time of the company's incorporation or through an amendment to the existing articles. For private companies, all members must agree, while for public companies, a special resolution is sufficient.
Entrenchment clauses must be in conformity with the Companies Act, 2013, and the company's Memorandum of Association (MOA). Any clause that overrides the Act or MOA is considered void and unenforceable.
Entrenchment is often beneficial for joint venture companies, companies with private equity or venture capitalist investments, and startups, as it can safeguard minority shareholders.
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