Corporate and Economic Laws · Compromises, Arrangements and Amalgamations

Takeover Offer, Squeeze-out and Dissenting Shareholders (Sections 235-236)

Updated 11 October 2026 · Fact-checked

Under section 235, if holders of at least nine-tenths in value of the shares involved approve a takeover scheme within four months of the offer, the transferee company can compulsorily acquire dissenters' shares by notice. Under section 236, a holder of 90% or more of the equity must buy out the minority at a registered valuer's price.

Understand Takeover Offer, Squeeze-out and Dissenting Shareholders (Sections 235-236)

A takeover can stall because a few shareholders refuse to sell. The Companies Act, 2013 gives the buyer a way to complete the deal, and gives the small holder protection on price. Sections 235 and 236 do this in two different situations.

Section 235 applies when a scheme or contract for transfer of shares in the transferor company to the transferee company is approved. The approval must come within four months after the offer is made, from holders of not less than nine-tenths in value of the shares whose transfer is involved. Shares already held at the date of the offer by the transferee company, a nominee of it, or its subsidiaries are left out of this count. The transferee company may then, within two months after those four months expire, give notice to any dissenting shareholder that it wants to acquire his shares.

Once notice is given, the transferee company is entitled and bound to acquire the shares on the same terms as the approving holders. The one exception: the dissenter applies to the Tribunal within one month of the notice and the Tribunal orders otherwise. After one month (or after a pending application is disposed of), the transferee company sends a copy of the notice and an instrument of transfer to the transferor company and pays the price. The transferor company registers the transferee as holder and, within one month of registration, informs the dissenters. The money goes into a separate bank account, is held in trust, and is disbursed within sixty days. A dissenting shareholder includes one who has not assented and one who has failed or refused to transfer.

Section 236 is different. It applies when an acquirer, or persons acting in concert, becomes registered holder of 90% or more of the issued equity share capital, by amalgamation, share exchange, conversion of securities or any other reason. The holder must notify the company of its intention to buy the remaining equity shares and offer to the minority at a price fixed by a registered valuer under the prescribed rules. The minority can also offer their shares to the majority at that price.

The majority deposits the value of the shares in a separate bank account operated by the company whose shares are being transferred, for at least one year. It is disbursed within sixty days, and continues for a year for those not paid. The company acts as transfer agent. Keep this contrast clear: section 235 is a squeeze-out inside a takeover offer; section 236 is a buyout duty on anyone who reaches 90%. Section 67 is a separate rule: a company cannot buy its own shares except by a lawful reduction of capital.

Key rules to remember

Section 235 approval threshold: Approval by holders of ≥ 9/10 in value of shares involved, within 4 months of the offer; Shares already held by the transferee company, its nominee or its subsidiaries at the date of the offer are excluded.
Section 235 notice window: Notice to dissenters within 2 months after the 4 months expire; Notice is given in the prescribed manner by the transferee company.
Dissenter's remedy: Tribunal application within 1 month of the notice; Otherwise the transferee company is entitled and bound to acquire on the same terms as approving holders.
Handling of money under section 235: Separate bank account; held in trust; disbursed within 60 days; Transferor company informs dissenters within 1 month of registering the transferee.
Section 236 trigger: Holding ≥ 90% of issued equity share capital (acquirer or persons acting in concert); Applies whatever the reason: amalgamation, share exchange, conversion of securities or otherwise.
Section 236 price: Price = valuation by a registered valuer under prescribed rules; Minority may also offer their shares to the majority at this price.
Section 236 deposit: Deposit value of shares in separate account for at least 1 year; pay within 60 days; Further disbursement continues for one year for those not paid. Rights of heirs of deceased holders continue for 3 years.
Section 236(8) sharing: If holders of ≥ 75% of the minority negotiate a higher price for onward transfer without disclosure, majority shares the extra pro rata; Applies where the minority shares were acquired under this section.

How to solve Takeover Offer, Squeeze-out and Dissenting Shareholders (Sections 235-236) questions

Use this order for any question on sections 235 or 236. Facts in the case decide which section applies, so identify that first.

1Decide the section. A scheme or contract with an offer and approval by holders points to section 235. An acquirer who has reached 90% of equity points to section 236.
2For section 235, find the offer date and check that the approval came within four months.
3Compute the 90% test in value, excluding shares already held by the transferee company, its nominee or its subsidiaries at the offer date.
4Check the notice: given within two months after the four months expired, to dissenting shareholders.
5Check the dissenter's options: a Tribunal application within one month of the notice. Without it, the transferee must acquire on the same terms.
6Trace payment: separate bank account, trust, disbursal within sixty days.
7For section 236, check the 90% holding, the notice to the company, the registered valuer's price and the deposit for at least one year.
8State the conclusion in one line and tie it to the section.

Quickest way: Four-question check

When to use it: Use for MCQs and short case scenarios where you need the answer in under two minutes.

Is there an offer and a scheme or contract? If yes, think section 235. If someone simply reached 90% of equity, think section 236.
Count the time limits: 4 months for approval, then 2 months for notice, then 1 month for the dissenter to go to the Tribunal.
Check the 90% and whether it is of value (section 235) or of issued equity share capital (section 236).
Check the price: same terms as approving holders (section 235), or registered valuer's price (section 236).

Common mistakes in Takeover Offer, Squeeze-out and Dissenting Shareholders (Sections 235-236)

Treating section 235 and section 236 as the same squeeze-out.
Both use a 90% figure and both end in compulsory acquisition.
Fix: Section 235 needs an offer and approval by 90% in value of shares involved. Section 236 needs only that a person holds 90% or more of issued equity capital.
Counting all shares in the 90% test under section 235.
Students overlook the exclusion in the text.
Fix: Leave out shares already held at the offer date by the transferee company, its nominee or its subsidiaries.
Mixing up the time limits.
There are four, two and one month periods in one section.
Fix: Four months to get approval after the offer; two months after that to give notice; one month from notice for the dissenter's Tribunal application.
Saying dissenters can never resist.
Students remember 'bound to acquire' and forget the exception.
Fix: If the dissenter applies to the Tribunal within one month and the Tribunal thinks fit to order otherwise, the acquisition does not go ahead as notified.
Saying the section 236 price is the offer price or the market price.
Confusion with takeover pricing from other laws.
Fix: Section 236 requires a price determined on valuation by a registered valuer under the prescribed rules.
Confusing section 236 with section 67.
Both concern purchase of shares.
Fix: Section 67 bars a company buying its own shares except by lawful capital reduction and bars financial assistance by a public company for share purchase. Sections 235 and 236 are purchases by another company or person.

Worked examples

Example 1

Alpha Ltd (transferee) made an offer on 1 January to acquire shares of Beta Ltd. Beta has 10,00,000 shares. Alpha already holds 2,00,000 of them. By 30 April, holders of 7,30,000 of the remaining shares accepted. Can Alpha use section 235? If so, by when must it give notice?

Show the solution

Shares involved in transfer = 10,00,000 − 2,00,000 held by Alpha = 8,00,000.
Nine-tenths of 8,00,000 = 7,20,000.
Acceptances are 7,30,000, which is more than 7,20,000. Approval came by 30 April, within four months of 1 January.
The four months expire on 1 May. Notice may be given within two months after that, that is, up to 1 July.
Alpha may then notify dissenters. Unless a dissenter applies to the Tribunal within one month of notice and the Tribunal orders otherwise, Alpha must acquire on the same terms.

Answer: Yes. Approval of 7,30,000 exceeds the required 7,20,000 (nine-tenths of 8,00,000 shares). Alpha may give notice to dissenters within two months after the four months expire, that is, by 1 July.

Example 2

Rohan acting in concert with Meera becomes holder of 92% of the issued equity share capital of Zenith Ltd after a share exchange. Rohan is silent. A minority holder asks what rights exist. Advise.

Show the solution

Together they hold 90% or more of issued equity capital, so section 236 applies. The reason (share exchange) does not matter.
They must notify Zenith Ltd of their intention to buy the remaining equity shares.
They must offer to buy minority shares at a price determined by a registered valuer under the prescribed rules.
The minority may also offer their shares to the majority at that price.
The majority must deposit the value of shares to be acquired in a separate bank account operated by the company whose shares are being transferred, for at least one year. Payment is to be disbursed within sixty days.

Answer: Section 236 applies. Rohan and Meera must notify the company and offer to buy the minority shares at a registered valuer's price, with funds deposited in a separate account. The minority can also offer its shares to the majority at that price.

Exam tips

In MCQs, examiners change one figure: 90% to 75%, four months to six months. Memorise the numbers exactly.
In case scenarios, first check which shares are excluded from the nine-tenths test under section 235.
Write the section number in your answer and state the condition before the conclusion.
Learn the contrast between sections 235 and 236 in a two-column form in your notes; comparison questions are natural here.
Remember the section 236(8) sharing rule: 75% of the minority and a higher price negotiated without disclosure.

Practice questions from Compromises, Arrangements and Amalgamations

Takeover Offer, Squeeze-out and Dissenting Shareholders (Sections 235-236): frequently asked questions

What is a dissenting shareholder under section 235?

It includes a shareholder who has not assented to the scheme or contract. It also includes one who has failed or refused to transfer his shares to the transferee company as the scheme or contract requires.

Can a dissenting shareholder challenge the acquisition?

Yes. The dissenter can apply to the Tribunal within one month from the date of the notice. If the Tribunal thinks fit to order otherwise, the transferee company is not bound to acquire on the notified terms.

What price do minority shareholders get under section 236?

The price is determined on the basis of valuation by a registered valuer in accordance with prescribed rules. The majority must deposit the amount in a separate bank account for at least one year.

Is the 90% in section 235 the same as the 90% in section 236?

No. Section 235 uses nine-tenths in value of the shares whose transfer is involved, with some shares excluded. Section 236 uses 90% or more of the issued equity share capital of the company.