Purchase of minority shares without compliance to Companies Act amounts to oppression and Mismanagement

Last updated: 06 October 2022

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The National Company Law Appellate Tribunal (NCLAT) ruled that acquiring minority shares without adhering to the Companies Act constitutes oppression and mismanagement. In this case, the majority shareholder attempted to buy out the minority shareholders using Section 236 of the Companies Act, which was deemed inapplicable as the acquisition wasn't due to amalgamation, share exchange, or conversion of securities. The NCLAT allowed the appeal, reinforcing that improper procedures for acquiring minority stakes are unlawful.

Court :
NCLAT

Brief :
The provisions of Section 236 of the Companies Act, 2013 specifically provides the procedure of acquisition of shares of minority, when a person personally or acting in concert with acquirer, acquires 90% or more issued share capital of the company by virtue of an amalgamation, share exchange, conversion of securities or for any other reason, such acquirer, person or group of persons, as the case may be, shall notify the company of their intention to buy the remaining equity shares. Any procedure used for acquiring minority shareholding than mentioned in Section 236 referred above is an act of Oppression and Mismanagement.

Citation :
Company Appeal (AT) No. 272/2018

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