Section 235: Power to acquire shares of shareholders dissenting from scheme approved by majority
Updated: May 9
A takeover refer to the acquisition of control the management of the target company. In layman's language, the company taking over is the big fish while the target company is the smaller fish. It must be noted that the word 'takeover' has not been defined under any act but is a casual routine term for those indulging in this field.
Section 235 of Companies Act, 2013 Power to acquire shares of shareholders dissenting from scheme or contract approved by majority has been effective from 15th December, 2016. Section 235 has different sub-sections under it, which are explained as follows:
Basic requirements as to acquisition of shares:
the scheme involving the transfer of shares in a company (the transferor company) to another company (the transferee company).
It has been approved by the holder of not less than 9/10th in value of the shares whose transfer is involved.
The approval from 9/10th shareholders in value shall be received within four months after making of an offer in that behalf by the transferee company.
The shares already held at the date of the offer by the Transferee Company, or by a nominee of the transferee company or its subsidiary company shall not be counted for this purpose.
The transferee company shall express this desire to acquire the remaining shares of dissenting shareholders within two months after the expiry of the said four months and shall give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares.
Order of Tribunal to acquire shares of dissenting shareholders:
Where a notice under sub-section (1) is given, the transferee company shall, be entitled to and bound to acquire those shares on the terms on which, under the scheme, the shares of the approving shareholders are to the transferee company.
Application by dissenting shareholders:
Receipt of notice
Dissenting shareholders < 1 month of receipt of notice.
Apply to NCLT
If application not approved
Transferee company bound to acquire shares of dissenting shareholders.
Separate Bank Account for disbursement to entitled shareholders
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 bt 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.