POINTS

EXPLANATION

1.Notifying company for purchase of minority shareholding [Sub-section (1)]:

• In the event of an acquirer, or a person acting in concert with such acquirer becoming registered holder of ninety per cent. or more of the issued equity share capital of a company, or
• In the event of any person or group of persons becoming ninety per cent. majority or holding ninety per cent. of the issued equity share capital of a company, by virtue of an amalgamation, share exchange, conversion of securities or for any other reason,

such acquirer, person or group of persons, as the case may be, shall notify the company of their intention to buy the remaining equity shares.

2. Offer of equity shares to minority shareholders by acquirer, person or group of persons [Sub-section (2)]:

The acquirer, person or group of persons shall offer to the minority shareholders of the company for buying the equity shares held by such shareholders at a price determined on the basis of valuation by a registered valuer in accordance with Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

3. Offer to majority shareholder to purchase the minority equity shareholding [Sub-section (3)]:

The minority shareholders of the company may offer to the majority shareholders to purchase the minority equity shareholding of the company at the price determined in accordance with Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

4. Deposit of amount in separate bank account [Sub-section (4)]:

The majority shareholders shall deposit an amount equal to the value of shares to be acquired by them under sub-section (2) or sub-section (3), as the case may be, in a separate bank account to be operated by the company whose shares are being transferred for at least one year for payment to the minority shareholders and such amount shall be disbursed to the entitled shareholders within sixty days:

Provided that such disbursement shall continue to be made to the entitled shareholders for a period of one year, who for any reason had not been made disbursement within the said period of sixty days or if the disbursement have been made within the aforesaid period of sixty days, fail to receive or claim payment arising out of such disbursement.

5. Company whose shares are being transferred to act as a transfer agent in the event of purchase [Sub-section (5)]:

In the event of a purchase under this section, the company whose shares are being transferred shall act as a transfer agent for receiving and paying the price to the minority shareholders and for taking delivery of the shares and delivering such shares to the majority, as the case may be.

6. Company whose shares are being transferred to issue shares [Sub-section (6)]:

In the absence of a physical delivery of shares by the shareholders within the time specified by the company,
 

• the share certificates shall be deemed to be cancelled, and
• the company whose shares are being transferred shall be authorized to issue shares in lieu of the cancelled shares and complete the transfer in accordance with law, and
• make payment of the price out of deposit made under sub-section (4) by the majority in advance to the minority by dispatch of such payment.

7. Right of shareholders to make an offer for sale of minority equity shareholding [Sub-section (7)]:

In the event of a majority shareholder or shareholders requiring a full purchase and making payment of price by deposit with the company for:

• any shareholder or shareholders who have died or ceased to exist, or
• whose heirs, successors, administrators or assignees have not been brought on record by transmission,

the right of such shareholders to make an offer for sale of minority equity shareholding shall continue and be available for a period of three years from the date of majority acquisition or majority shareholding.

8. Sharing of additional compensation [Sub-section (8)]:

Where the shares of minority shareholders have been acquired in pursuance of this section, and as on or prior to the date of transfer following such acquisition, the shareholders holding seventy-five per cent. or more minority equity shareholding negotiate or reach an understanding on a higher price for any transfer, proposed or agreed upon, of the shares held by them without disclosing the fact or likelihood of transfer taking place on the basis of such negotiation, understanding or agreement, the majority shareholders shall share the additional compensation so received by them with such minority shareholders on a pro rata basis.

9. Determination of price for purchase of minority shareholders:

Rule 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 prescribes that the registered valuer shall determine the price to be paid by the acquirer, person or group of persons referred to in sub-section (1) of section 236 of the Act for purchase of equity shares of the minority shareholders of the company in accordance with the prescribed rules.

10. On failure of acquisition of shares [Sub-section (9)]:

When a shareholder or the majority equity shareholder fails to acquire full purchase of the shares of the minority equity shareholders, then, the provisions of this section shall continue to apply to the residual minority equity shareholders, even though:

1. the shares of the company of the residual minority equity shareholder had been delisted; and
2. the period of one year or the period specified in the regulations made by the Securities and Exchange Board under the Securities and Exchange Board of India Act, 1992 has lapsed.