out refers to the right of a majority shareholder, holding shares
above a certain threshold, to acquire shares held by the
minority shareholders, thereby providing them exit from the
company. Under the Companies Act, 2013 (Act), there are
existing mechanisms for buying out the minority shareholders.
These include reduction of share capital under section 66 of the
Act, purchase of minority shareholding pursuant to section 236 of
the Act, acquisition of shares under section 235 of the Act.
The Notification permits the shareholders of an unlisted company
holding not less than three- fourth of the shares of such company,
to make a takeover offer for acquiring the remaining shares of the
minority shareholders. The takeover offer is to be made pursuant
to an application of compromise or arrangement filed before the
National Company Law Tribunal (NCLT) under section 230 of the Act
and is required to follow the compliances set out in the said
section (as already in force for matters relating to compromises
and arrangements). The scheme containing the takeover application
is required to be approved by the creditors/members or the
relevant class of creditors or members. Further, the Act also
requires sending out the copy of the application to all regulatory
authorities, such as central government, income tax authority,
Reserve Bank of India, Securities and Exchange Board of India
(SEBI), Registrar of Companies, Competition Commission of India
and other such sectoral regulators or authorities, as applicable.
In addition to the other information/documents to be filed for compromises or arrangements with NCLT under section 230 of the Act, the Rules provide that the takeover offer is also required to be accompanied with the report of a registered valuer. The report must disclose the details of the valuation of the shares proposed to be acquired. In terms of the Rules, the following factors are required to be considered viz.-à-viz. the valuation, for arriving at the price:
Additionally, the acquiring members are required to open a separate bank account and deposit at least 50% of the total consideration of the takeover offer in such bank account prior to making an application to the NCLT. The details of such bank account are required to be provided to the NCLT along the application documents.
addition to the existing rights given to the shareholders and
creditors under section 230(4) of the Act to object to a scheme of
arrangement or compromise, the newly notified section 230(12)
offers an additional protection to the minority shareholders.