Section 235: Power to acquire shares of shareholders dissenting from scheme or contract approved by majority
This section allows a transferee company to acquire shares from dissenting shareholders if a scheme or contract is approved by a majority of at least nine-tenths in value of the shares.
The section, clause by clause
What the section says
In plain terms
(1)Where a scheme or contract involving the transfer of shares or any class of shares in a company (the transferor company) to another company (the transferee company) has, within four months after making of an offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved, other than shares already held at the date of the offer by, or by a nominee of the transferee company or its subsidiary companies, the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares.
If a scheme or contract to transfer shares is approved by holders of at least nine-tenths in value of the shares within four months of the offer, the transferee company can give notice to dissenting shareholders to acquire their shares within two months after the four-month period.
(2)Where a notice under sub-section (1) is given, the transferee company shall, unless on an application made by the dissenting shareholder to the Tribunal, within one month from the date on which the notice was given and the Tribunal thinks fit to order otherwise, be entitled to and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company.
When a notice is given, the transferee company must acquire the dissenting shareholder's shares on the same terms as the approving shareholders, unless the Tribunal orders otherwise within one month of the notice.
(3)Where a notice has been given by the transferee company under sub-section (1) and the Tribunal has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Tribunal by the dissenting shareholder is then pending, after that application has been disposed of, send a copy of the notice to the transferor company together with an instrument of transfer, to be executed on behalf of the shareholder by any person appointed by the transferor company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire, and the transferor company shall—
After giving notice, the transferee company must send a copy of the notice and an instrument of transfer to the transferor company, pay the price for the shares, and the transferor company must register the transferee company as the holder of the shares and inform the dissenting shareholders within one month.
(3)(a)thereupon register the transferee company as the holder of those shares; and
(3)(b)within one month of the date of such registration, inform the dissenting shareholders of the fact of such registration and of the receipt of the amount or other consideration representing the price payable to them by the transferee company.
(4)Any sum received by the transferor company under this section shall be paid into a separate bank account, and any such sum and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sum or other consideration were respectively received and shall be disbursed to the entitled shareholders within sixty days.
The transferor company must hold any sum received in a separate bank account in trust for the entitled shareholders and disburse it within sixty days.
(5)In relation to an offer made by a transferee company to shareholders of a transferor company before the commencement of this Act, this section shall have effect with the following modifications, namely:—
For offers made before the commencement of this Act, the section applies with modifications to the wording of sub-sections (1) and (3).
(5)(a)in sub-section (1), for the words “the shares whose transfer is involved other than shares already held at the date of the offer by, or by a nominee of, the transferee company or its subsidiaries,”, the words “the shares affected” shall be substituted; and (b) in sub-section (3), the words “together with an instrument of transfer, to be executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferor company” shall be omitted.
explanationExplanation.—For the purposes of this section, “dissenting shareholder” includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with the scheme or contract.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 1 of 2018, s. 73, for “transferor company” (w.e.f. 9-2-2018).
- 2. Subs. by Act 1 of 2018, s. 73, for “transferor company” (w.e.f. 9-2-2018).
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.