Amended and updated notes on section 235 of Companies Act 2013. Detail discussion on provisions and rules related to power to acquire shares of shareholders dissenting from scheme or contract approved by majority.
Chapter XV (Sections 230–240) of the Companies Act, 2013 (CA 2013) deals with the provisions related to Compromises, Arrangements and Amalgamations. Section 235 of CA 2013 provides for power to acquire shares of shareholders dissenting from scheme or contract approved by majority.
Recently, we have discussed in detail section 234 (Merger or amalgamation of company with foreign company) of CA 2013. Today, we learn the provisions of section 235 of Companies Act 2013.
The provisions of section 235 are effective from 15-Dec-2016. You may refer Notification No. S.O. 3677(E) issued dated 07-12-2016. In this article, you will learn detail of the provisions of section 235 of the Companies Act 2013 read with the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.
| Name of Act | The Companies Act 2013 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Ministry of Corporate Affairs (MCA) |
| Number of Chapters | 29 |
| Number of Sections | 484 (470-43+57) |
| Number of Schedules | 7 |
| You are reading: | |
| Chapter No. | XV |
| Chapter Name | Compromises, Arrangements and Amalgamations |
| Section No. | 235 |
| Section Name | Power to acquire shares of shareholders dissenting from scheme or contract approved by majority |
| Monthly Updated Edition | Company Law PDF |
Section 235 of Companies Act 2013: Power to acquire shares of shareholders dissenting from scheme or contract approved by majority
Section 235 shall come into force on 15th December, 2016 vide Notification No. S.O. 3677(E) dated 07.12.2016.
(1) Where a scheme or contract involving the transfer of shares or any class of shares in a company (the transferor company) to another company (the transferee company) has, within four months after making of an offer in that behalf by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved, other than shares already held at the date of the offer by, or by a nominee of the transferee company or its subsidiary companies, the transferee company may, at any time within two months after the expiry of the said four months, give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares.
(2) Where a notice under sub-section (1) is given, the transferee company shall, unless on an application made by the dissenting shareholder to the Tribunal, within one month from the date on which the notice was given and the Tribunal thinks fit to order otherwise, be entitled to and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred to the transferee company.
(3) Where a notice has been given by the transferee company under sub-section (1) and the Tribunal has not, on an application made by the dissenting shareholder, made an order to the contrary, the transferee company shall, on the expiry of one month from the date on which the notice has been given, or, if an application to the Tribunal by the dissenting shareholder is then pending, after that application has been disposed of, send a copy of the notice to the transferor company together with an instrument of transfer, to be executed on behalf of the shareholder by any person appointed by the transferor company and on its own behalf by the transferee company, and pay or transfer to the transferor company the amount or other consideration representing the price payable by the transferee company for the shares which, by virtue of this section, that company is entitled to acquire, and the transferor company shall—
- (a) thereupon register the transferee company as the holder of those shares; and
- (b) within one month of the date of such registration, inform the dissenting shareholders of the fact of such registration and of the receipt of the amount or other consideration representing the price payable to them by the transferee company.
(4) Any sum received by the transferor company under this section shall be paid into a separate bank account, and any such sum and any other consideration so received shall be held by that company in trust for the several persons entitled to the shares in respect of which the said sum or other consideration were respectively received and shall be disbursed to the entitled shareholders within sixty days.
(5) In relation to an offer made by a transferee company to shareholders of a transferor company before the commencement of this Act, this section shall have effect with the following modifications, namely: —
- (a) in sub-section (1), for the words “the shares whose transfer is involved other than shares already held at the date of the offer by, or by a nominee of the transferee company or its subsidiaries”, the words “the shares affected” shall be substituted; and
- (b) in sub-section (3), the words “together with an instrument of transfer, to be executed on behalf of the shareholder by any person appointed by the transferee company and on its own behalf by the transferor company” shall be omitted.
Explanation: For the purposes of this section, “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