Section 235 of the Companies Act, 2013 empowers a transferee company to acquire the shares of dissenting shareholders where a scheme or contract involving the transfer of shares of a transferor company to the transferee company has been approved by the holders of not less than ninety per cent in value of the shares whose transfer is involved, within four months of the offer.
The Offer and the Approval
The transferee company makes an offer to the shareholders of the transferor company to acquire their shares. The offer must be approved by the holders of at least ninety per cent in value of the shares whose transfer is involved, and the approval must be obtained within four months of the offer. The transferee company must give notice of the approval to the dissenting shareholders within two months, and the dissenting shareholders may apply to the NCLT within two months of the notice.
The Dissenting Shareholder
The term “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 dissenting shareholder has the right to object to the acquisition, and the NCLT may order that the transferee company is not entitled to acquire the shares, or that the acquisition is on terms that the Tribunal considers fair.
The Acquisition
Where the dissenting shareholder does not object, or where the NCLT dismisses the objection, the transferee company is entitled to acquire the shares on the terms of the offer. The transferee company must pay the consideration to the transferor company, and the transferor company must hold the consideration in trust for the dissenting shareholders. The transferee company must inform the dissenting shareholders of the registration of the shares and the receipt of the consideration.
A technically sound Section 235 acquisition is supported by a compliant offer, the ninety per cent approval, and the notice to the dissenting shareholders, and it respects the dissenting shareholders’ right to object.
Call to Action
Anuj Desai & Associates advises transferee companies and dissenting shareholders on Section 235 acquisitions—from the offer and the ninety per cent approval to the notice and the NCLT objection. If you are involved in a Section 235 acquisition, we can help you assess the position.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
🔗 linkedin.com/in/ca-anuj-desai-122547230
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