purchase of minority shareholdings

MCA has vide its notification dated 17th December, 2020 amended the Companies (Compromises, Arrangements & Amalgamations) Rules, 2016 as follows. It has introduced a new rule 26A specifying the procedures to be followed in the case of purchase of minority shareholding held in demat form. Read on.

  1. The company shall within two weeks of the receipt of amount equal to the price of shares to be acquired by the acquirer verify details of the shareholders holding shares in demat form;
  2. After verification as above, the company has to send notice to the shareholder (via speedpost/ courier/ e-mail/ registered post) informing him of the purchase of his shares in the company and giving a one month cut off (from the date of sending the notice) after which the shares shall be debited from his demat account and credited to the demat account of the company (designated demat account of the company);
  3. The notice as above should also be published in two widely circulated newspapers in the district where the registered office of the company is situated and also uploaded on the website of the company, if any.
  4. The company has to inform the depository after the notice has been published and also give some undertakings such as : corporate action under section 236, that the minority shareholders have been intimated, that the minority shareholders shall be paid by the company immediately after completion of corporate action and that any dispute or complaints shall be settled by the company;
  5. The Board has to authorise the company secretary or any other official for effecting transfer of shares through corporate action, to make necessary disclosures to the depository and to submit whatever documents required in this regard;
  6. The depository, upon receipt of the information as above from the company, make necessary transfer of shares from the demat account of the minority shareholder to the designated demat account of the company, unless some shareholders have made direct transaction with the acquirer in this regard. Post that they have to intimate the company accordingly;
  7. Once the intimation has been received by the company from the depository as above, they shall immediately disburse the amount into the bank account of the minority shareholders. The stamp duty on the transfers as above, has to be paid by the company itself;
  8. After the payment is made as above to the minority shareholders, the company shall intimate the same to the depository who shall then transfer the shares from the designated demat account of the company to the demat account of the acquirer;
  9. The above rules shall not apply if there is a specific order of the court or tribunal staying the transfer of any shares or payment of dividend or where the shares are pledged or hypothecated – in such case the shares shall not be transferred to the designated demat account of the company.
  10. Earlier in the definition clause “corporate action” has been defined to mean any action taken by the company relating to transfer of shares and all benefits accruing from transfer of such shares viz. bonus shares, split, consolidation, fraction shares and rights issue to the acquirer.
  11. The copy of the said notification can be found at the MCA site viz. http://www.mca.gov.in

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