The MCA notified section 230 (11) and 230 (12) of Companies Act, 2013 giving majority shareholders further
On 3 February 2020, the Central Government notified sections 230(11) and section 230(12) of Companies Act, 2013.
The provisions permit taking over of a company by a scheme of arrangements or to raise grievances in this regard. This is after there is an application by the National Company Law Tribunal (NCLT).
Thus the Companies (Compromise, Arrangements and Amalgamations) Amendment Rules, 2020 (“Amendment Rules”) have been notified. These amend the Companies (Compromise, Arrangements and Amalgamations) Rules, 2016 (“Rules”).
The Amendment Rules state that the application for arrangement can be made under section 230(11) of the Companies Act, 2013. This arrangement is to make takeover offers for companies.
This can be made by any member with other members not holding less than 3/4th or 75% shares of the shares in the company, where the application has been filed to acquire all or part of the remaining shares.
The shares for the aforesaid would be equity shares of the company with voting rights. This would include securities like depository receipts and this entitles the holder to exercise voting rights.
Thus the focus of the Amendment Rules is to have ownership of securities along with voting rights as opposed to ‘issued equity share capital’ as in section 236 of Companies Act, 2013. Thus with the Amendment Rules, there is focus upon gaining control over the company by the majority shareholders rather than merely acquiring the shares.
A report of the registered valuer detailing the valuation of shares will also be attached. This has to take into consideration the following factors:
The highest price paid for acquisition of shares in the past 12 (twelve) months.
Return on the net worth
Book values of shares
Earning per shares
Price earning multiple vis-à-vis the industry average
Other factors customary in valuation
There also has to be details of a separately opened bank account with half the total consideration of the takeover offer deposited in it.
It will not be applicable when there is transfer or transmission through contract, arrangement and succession or any other transfer made due to a statute or regulation.
The MCA has also notified the National Company Law Tribunal (Amendment) Rules, 2020. These state that an application can be made under section 230(12) in Form NCLT-1.
This can be done by an aggrieved party when there is a grievance as far as takeover offer of unlisted companies is concerned. In case there is takeover of listed then the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 shall apply.
Also, as per section 230(11) and section 230(12) of the Companies Act, 2013, the majority of shareholders have a choice beyond the already available options of section 66 of Companies Act, 2013 for reduction of share capital and purchase of minority shareholders as under section 236 of the Companies Act, 2013 to facilitate exit of minorities.
Thus the Amendment Rules help the majority shareholders to bypass the complex procedure of section 66 of Companies Act, 2013 and merely requires filing of application before the NCLT with supporting documents.
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