A minority squeeze-out is the acquisition of the remaining shares of a company by the majority shareholder, resulting in the minority’s exit. In a listed company, the squeeze-out can be achieved through Section 236 of the Companies Act, 2013, through a selective capital reduction under Section 66, or through a scheme of arrangement under Section 230 read with the SEBI Delisting Regulations.
The Section 236 Route
Section 236 applies where an acquirer, or a person acting in concert with the acquirer, becomes the registered holder of ninety per cent or more of the issued equity share capital of a company, whether by virtue of an amalgamation, a share exchange, a conversion of securities, or any other reason. The acquirer must notify the company of its intention to buy the remaining equity shares, and it must offer to the minority shareholders a price determined on the basis of a valuation by a registered valuer. The majority shareholders must deposit the value of the shares in a separate bank account operated by the company, and the amount must be disbursed to the entitled shareholders within sixty days.
The Selective Capital Reduction Route
A selective capital reduction under Section 66 can be used to squeeze out the minority, and it requires the approval of seventy-five per cent of the voting securities and the final sanction of the NCLT. The NCLT examines the fairness of the valuation and the process, and the Supreme Court’s decision in Pannalal Bhansali confirms that the Tribunal must protect the minority’s interests.
The SEBI Overlay
For a listed company, the squeeze-out must comply with the SEBI Takeover Code and the Delisting Regulations. The open offer obligations may be triggered, and the delisting route under Regulation 37 may be available where the conditions are satisfied. The interaction between Section 236 and the SEBI regulations is complex, and the acquirer should obtain the SEBI’s guidance before the squeeze-out is implemented.
A technically sound squeeze-out is structured to comply with the Section 236 or Section 66 route, the SEBI regulations, and the minority protection requirements, and it is supported by a registered valuer’s report.
Call to Action
Anuj Desai & Associates advises acquirers and minority shareholders on minority squeeze-outs—from the Section 236 notification and the registered valuer valuation to the selective capital reduction and the SEBI compliance. If you are considering a squeeze-out, we can help you structure the transaction.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
Article 278