Corporate Law Update: New M&A Rules affect Minority Shareholders

Ajay G Prasad, Kochhar & Co¹

The Ministry of Corporate affairs has recently notified Sections 230(11) and 230 (12) of the Companies Act, 2013 ("Companies Act") and certain amendments to the Companies (Compromises, Arrangements and Amalgamation) Rules, 2020 ("M&A Rules")² (together, the "Amendments").

The Amendments provide that a member holding not less than three-fourths of the shares in the company ("Majority Shareholder") can file an application for acquiring the shares held by the other shareholders, i.e. shareholders holding the other one-fourths of the shares in the company ("Minority Shareholders"). However, the application for buying-out the Minority Shareholders should be made under a 'compromise' or an 'arrangement' under Section 230 of the Companies Act, 2013 (the "Companies Act").