Section 236 of the Companies Act, 2013
Section 236 of the Companies Act, 2013 – Purchase of Minority Shareholding
Objective:
Section 236 deals with the rights and procedures for the purchase of shares held by minority shareholders when there is a takeover or majority acquisition in a company.
Key Provisions:
🧑🤝🧑 1. When Does Section 236 Apply?
When an acquirer or person acting in concert:
Becomes the registered holder of 90% or more of a company’s issued equity share capital (including through amalgamation, share purchase, etc.)
💰 2. Obligation to Buy Minority Shares:
The acquirer must offer to buy the remaining equity shares held by the minority shareholders at a fair price determined by a registered valuer.
🏦 3. Rights of Minority Shareholders:
Minority shareholders also have the right to offer their shares to the majority shareholder, and the majority shareholder is obliged to buy them at the determined price.
🔁 4. Transfer and Payment Process:
The acquirer must:
Deposit the total amount (for purchasing the minority shares) in a separate bank account operated by a transfer agent.
Ensure the transfer of shares and payment to minority shareholders within a prescribed timeline.
🧾 5. Role of the Company:
The company must assist in the transfer process and ensure compliance.
📈 6. Continuation of Fair Valuation:
If minority shareholders do not respond, their shares may still be transferred, and they are entitled to receive the fair value amount as determined earlier.
✅ Purpose:
To ensure that:
Minority shareholders are protected during takeovers or change in control.
They receive fair value for their shares and are not exploited or left behind without an exit option.
📌 Example:
If Company A acquires 92% of Company B, the promoters of A must offer to buy out the remaining 8% shares from minority shareholders of B at a fair price determined by a valuer.
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