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SECTION 238 REGISTRATION OF OFFER OF SCHEMES INVOLVING THE TRANSFER OF SHARES

Updated: Oct 7

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01. For any offer of a plan or agreement involving the transfer of shares (signifies a share in a company's share capital, which also includes stock)[1] or any class of shares from the transferor business to the transferee company under section 235,

  • Every circular conveying such an offer and the recommendation by the transferor company's directors (implies a director who has been appointed to a company's board)[2] that its members (meaning the person who signed the company's memorandum, who will be considered to have consented to join the business and who, upon the company's registration, will be listed as a member in its register of members; every other individual whose name is listed in the company's register of members and who formally accepts membership in writing; every shareholder listed as a beneficial owner in a depository's records who also holds shares of the company)[3] accept it must be accompanied with the information and in the manner prescribed by law (please refer Companies (Compromises, Arrangements, and Amalgamations) Rules, 2016, Rule 28);

  • Every such offer must include a statement from the transferee firm, or on its behalf, outlining the measures it has taken to make sure the required cash will be available; and

  • Every such circular must be submitted to the Registrar (implies a Registrar, Additional Registrar, Joint Registrar, Deputy Registrar, or Assistant Registrar who is responsible for carrying out the Act's many duties, including the registration of corporations)[4] for registration; once registered, no such circular may be issued.

With the caveat that the Registrar may decline to register any circular that omits or presents the information necessary to be provided under subsection (a) and notifies the parties of this decision within thirty days of the application for registration, for reasons to be documented in writing.


02. A refusal by the Registrar to register any circular under subsection (1) may be appealed (The Companies (Compromises, Arrangements and Amalgamations) Rules, 2016, rule 29 should be consulted.) to the Tribunal (National Company Law NCLT- NCLT[5] is a quasi-judicial[6] body which is authorised for dealing with the corporate disputes which are civil and arising under the Companies Act).


03. The director faces a fine of one lakh rupees if he or she releases a circular that has not been submitted for registration and registered by clause (c) of sub-section (1).


Rules for such orders


  • Rule 28 Circular containing a scheme of amalgamation or merger

  • Every circular containing an offer of a scheme or contract involving the transfer of shares or any class of shares and a recommendation to the members of the transferor company by its directors to accept such offer must be accompanied by the information specified in Form Number CAA.15[7] for clause (a) of subparagraph (1) of section 238 of the Act.

  • The Registrar must be shown the circular before it may be registered.


  • Rule 29 Appeal under sub-section (2) of section 238 of the Act

  • Under subsection (2) of section 238 of the Act, any party who feels aggrieved may appeal the Registrar of Companies' decision to refuse to register a circular. This appeal must be made in Form Number NCLT 9[8] (attached to the National Company Law Tribunal Rules, 2016) and must be accompanied by an affidavit in Form Number NCLT 6[9] (appended in the National Company Law Tribunal Rules, 2016).


What is National Company Law Tribunal?

It is a quasi-judicial body which is authorised for dealing with the corporate disputes which are civil and arising under the Companies Act

The current President of NCLT is Chief Justice (Retd.) Ramalingam Sudhakar[10].


Functions-