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Section 236: Purchase of minority shareholding

Companies Act, 2013 · Chapter XV: Compromises, Arrangements And Amalgamations · In force

This section is for the purchase of minority shareholding in a company when a majority shareholder owns 90% or more of the equity share capital.

The section, clause by clause

What the section says
In plain terms
(1)In the event of an acquirer, or a person acting in concert with such acquirer, becoming registered holder of ninety per cent. or more of the issued equity share capital of a company, or in the event of any person or group of persons becoming ninety per cent. majority or holding ninety per cent. of the issued equity share capital of a company, by virtue of an amalgamation, share exchange, conversion of securities or for any other reason, such acquirer, person or group of persons, as the case may be, shall notify the company of their intention to buy the remaining equity shares.
If someone owns 90% or more of a company's equity share capital, they must notify the company of their intention to buy the remaining shares.
(2)The acquirer, person or group of persons under sub-section (1) shall offer to the minority shareholders of the company for buying the equity shares held by such shareholders at a price determined on the basis of valuation by a registered valuer in accordance with such rules as may be prescribed.
The majority shareholder must offer to buy the minority shareholders' shares at a price determined by a registered valuer.
(3)Without prejudice to the provisions of sub-sections (1) and (2), the minority shareholders of the company may offer to the majority shareholders to purchase the minority equity shareholding of the company at the price determined in accordance with such rules as may be prescribed under sub-section (2).
Minority shareholders can also offer to sell their shares to the majority shareholders at a price determined by a registered valuer.
(4)The majority shareholders shall deposit an amount equal to the value of shares to be acquired by them under sub-section (2) or sub-section (3), as the case may be, in a separate bank account to be operated by the 1[company whose shares are being transferred] for at least one year for payment to the minority shareholders and such amount shall be disbursed to the entitled shareholders within sixty days:
The majority shareholders must deposit the value of the shares to be acquired in a separate bank account for at least 1 year, and disburse the amount to minority shareholders within 60 days.
provisoProvided that such disbursement shall continue to be made to the entitled shareholders for a period of one year, who for any reason had not been made disbursement within the said period of sixty days or if the disbursement have been made within the aforesaid period of sixty days, fail to receive or claim payment arising out of such disbursement.
(5)In the event of a purchase under this section, the 2[company whose shares are being transferred] shall act as a transfer agent for receiving and paying the price to the minority shareholders and for taking delivery of the shares and delivering such shares to the majority, as the case may be.
The company must act as a transfer agent to receive and pay the price to minority shareholders and take delivery of the shares.
(6)In the absence of a physical delivery of shares by the shareholders within the time specified by the company, the share certificates shall be deemed to be cancelled, and the 1[company whose shares are being transferred] shall be authorised to issue shares in lieu of the cancelled shares and complete the transfer in accordance with law and make payment of the price out of deposit made under sub-section (4) by the majority in advance to the minority by dispatch of such payment.
If minority shareholders do not deliver their shares within the specified time, the share certificates will be deemed cancelled, and the company will issue new shares and make payment to the minority shareholders.
(7)In the event of a majority shareholder or shareholders requiring a full purchase and making payment of price by deposit with the company for any shareholder or shareholders who have died or ceased to exist, or whose heirs, successors, administrators or assignees have not been brought on record by transmission, the right of such shareholders to make an offer for sale of minority equity shareholding shall continue and be available for a period of three years from the date of majority acquisition or majority shareholding.
If a minority shareholder has died or ceased to exist, their heirs or successors can still sell their shares for 3 years from the date of majority acquisition.
(8)Where the shares of minority shareholders have been acquired in pursuance of this section and as on or prior to the date of transfer following such acquisition, the shareholders holding seventy-five per cent. or more minority equity shareholding negotiate or reach an understanding on a higher price for any transfer, proposed or agreed upon, of the shares held by them without disclosing the fact or likelihood of transfer taking place on the basis of such negotiation, understanding or agreement, the majority shareholders shall share the additional compensation so received by them with such minority shareholders on a pro rata basis. Explanation.—For the purposes of this section, the expressions “acquirer” and “person acting in concert” shall have the meanings respectively assigned to them in clause (b) and clause (e) of sub- regulation (1) of regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
If minority shareholders negotiate a higher price for their shares, the majority shareholders must share the additional compensation with them on a pro rata basis.
(9)When a shareholder or the majority equity shareholder fails to acquire full purchase of the shares of the minority equity shareholders, then, the provisions of this section shall continue to apply to the residual minority equity shareholders, even though,—
The provisions of this section will continue to apply to residual minority shareholders even if the company's shares have been delisted or the 1-year period has elapsed.
(9)(a)the shares of the company of the residual minority equity shareholder had been delisted; and
(9)(b)the period of one year or the period specified in the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992 (15 of 1992), had elapsed.

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

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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.