Section 230 of the Companies Act, 2013 (“Companies Act”) sets out the process for a scheme of arrangement between a company and its creditors and shareholders (“Scheme”). Such Schemes have to be approved by the National Company Law Tribunal (“NCLT”).

A Scheme can include a proposal for a merger or a demerger of a company, in which case the procedure in section 232 of the Companies Act would also have to be followed. Can a Scheme provide that a shareholder or any person will acquire the shares of other shareholders of the company? This issue was addressed when the Companies Act was enacted in 2013, and a provision[1] was included which permitted a Scheme to include a takeover offer. The rules for such a takeover offer were to be notified. It is on February 3, 2020 that the Government of India notified the said provision and also prescribed rules in this regard by issuing the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules, 2020 (“Rules”) which amend the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016.

This paper provides an overview of the new Rules for takeovers and analyses their impact.

New Rules for Takeover of Unlisted Companies and consequent Minority Squeezeout - [Download Pdf]