Section 236 of the Companies Act, 2013 provides a statutory squeeze-out mechanism. 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, or where any person or group becomes a ninety per cent majority by virtue of an amalgamation, share exchange, conversion of securities, or any other reason, the acquirer must notify the company of its intention to buy the remaining equity shares.
The Offer and the Valuation
The acquirer must offer to the minority shareholders a price determined on the basis of a valuation by a registered valuer in accordance with the rules. The valuation must comply with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, and it must reflect the fair value of the shares. The minority shareholders may also offer to the majority shareholders to purchase the minority’s shareholding at the price determined under the rules.
The Deposit and the Disbursement
The majority shareholders must deposit an amount equal to the value of the shares to be acquired in a separate bank account operated by the company, for at least one year, for payment to the minority shareholders. The amount must be disbursed to the entitled shareholders within sixty days, and the disbursement must continue for one year for the shareholders who did not receive or claim the payment within the sixty-day period.
The Deemed Cancellation
Where the minority shareholders do not deliver the shares within the time specified by the company, the share certificates are deemed to be cancelled, and the company is authorised to issue shares in lieu of the cancelled shares and complete the transfer. The right of the shareholders who have died or ceased to exist to make an offer for sale continues for three years from the date of the majority acquisition.
A technically sound Section 236 squeeze-out is supported by a registered valuer’s report, complies with the deposit and disbursement mechanics, and protects the minority’s right to a fair price.
Call to Action
Anuj Desai & Associates advises acquirers and minority shareholders on Section 236 squeeze-outs—from the ninety per cent trigger and the registered valuer valuation to the deposit, the disbursement, and the deemed cancellation. If you are considering a Section 236 buyout, we can help you structure it.
📧 office@anujdesaiassociates.com
📞 9619456656
🌐 https://anujdesaiassociates.com
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