Section 238: Registration of offer of schemes involving transfer of shares
This section is for regulating the registration of offers to transfer shares between companies to ensure transparency and fairness.
Penalty
(3) The director who issues a circular which has not been presented for registration and registered under clause (c) of sub-section (1), shall be 1[liable to a penalty of one lakh rupees.]
The section, clause by clause
What the section says
In plain terms
(1)In relation to every offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company under section 235,— (a) every circular containing such offer and recommendation to the members of the transferor company by its directors to accept such offer shall be accompanied by such information and in such manner as may be prescribed;
When a company makes an offer to transfer shares to another company, it must provide prescribed information to its members and disclose how the other company will ensure it has enough cash, and the offer circular must be registered with the Registrar before it is issued.
(1)(b)every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available; and
(1)(c)every such circular shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered:
provisoProvided that the Registrar may refuse, for reasons to be recorded in writing, to register any such circular which does not contain the information required to be given under clause (a) or which sets out such information in a manner likely to give a false impression, and communicate such refusal to the parties within thirty days of the application.
(2)An appeal shall lie to the Tribunal against an order of the Registrar refusing to register any circular under sub-section (1).
If the Registrar refuses to register the circular, the company can appeal to the Tribunal.
(3)The director who issues a circular which has not been presented for registration and registered under clause (c) of sub-section (1), shall be 1[liable to a penalty of one lakh rupees.]
A director who issues an unregistered circular is liable to a penalty of one lakh rupees.
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 22 of 2019, s. 32, for “punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees” (w.e.f. 2-11-2018).
This section refers to
Search the whole Act, or ask it a question, in the interactive browser.
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.