Notice to Dissenting Shareholders explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
When a scheme or contract to transfer shares in one company to another is approved by holders of at least nine-tenths in value of the shares involved, the transferee company may compel the remaining holders to sell on the same terms. It does so by a notice to each dissenting shareholder, in Form CAA.14. This article gives a specimen and explains the time limits and the dissenting shareholder's right to go to the Tribunal.
The transferee company gives each dissenting shareholder a notice that it wishes to acquire his or her shares on the terms of the approved offer, at the price paid to the approving shareholders, and tells the shareholder that he or she may apply to the Tribunal within one month. Under section 235(1), the offer must have been approved within four months after the offer by holders of not less than nine-tenths in value of the shares involved (excluding those already held by the transferee company or its nominees or subsidiaries), and the notice must be given within two months after the expiry of that four months. Unless the shareholder applies to the Tribunal within one month from the notice, and the Tribunal orders otherwise, the transferee company is entitled and bound to acquire the shares. The format follows the form as printed in the rules consulted; check the current form and the prescribed manner of notice before use.
When you need this notice
You need it when a transferee company has made an offer to the shareholders of a transferor company to acquire its shares or a class of its shares under a scheme or contract, and the nine-tenths approval has been obtained within the statutory window. It is the compulsory-acquisition counterpart of the offer. A different but related route is the purchase of minority shareholding under section 236, available when an acquirer or a person acting in concert becomes the registered holder of ninety per cent or more of the issued equity share capital; see our section 236 guide and the section 230 guide for the scheme provisions with which section 235 is sometimes read. For help with the notices and the follow-up, see our compliance documentation service.
Specimen notice
FORM NO. CAA.14 NOTICE TO DISSENTING SHAREHOLDERS To, Folio / Client ID: Notice for acquiring shares held by you in (the transferor company) Notice is hereby given by (the transferee company) that the offer made by the transferee company on to all the shareholders of the transferor company for the acquisition of the shares at the price of per share has, within four months after the offer, been approved by holders of shares, being not less than nine-tenths in value of the shares involved (other than shares already held at the date of the offer by the transferee company, by its nominees or by its subsidiaries). In pursuance of sub-section (1) of section 235 of the Companies Act, 2013, notice is further given that the transferee company desires to acquire the shares held by you in the transferor company at the price of per share, being the price paid to the approving shareholders, on the terms of the offer. Take further notice that if you do not wish your shares to be so acquired, you may apply to the Tribunal within one month from the date of this notice. Unless an application is made by you, or unless on such application the Tribunal orders otherwise, the transferee company will be entitled and bound to acquire the shares held by you in the transferor company on the terms of the offer. .] Date: Place: For and on behalf of
Clause-by-clause explanation
| Part | What it does | Drafting tip |
|---|---|---|
| Addressee | Identifies the dissenting shareholder and the holding | Use the registered address and folio |
| Reference to the offer | States the offer's date and price | Quote the offer date exactly |
| Statement of approval | Shows the nine-tenths in value approval within four months | Say that shares held by the transferee, nominees or subsidiaries are excluded |
| Desire to acquire | Invokes section 235(1) and states the price | The price is the one paid to approving shareholders |
| One-month warning | Tells the shareholder how to resist | State the right to apply to the Tribunal |
| Effect of no application | States that the transferee is entitled and bound to acquire | Keep this sentence |
| Signature block | Authenticates on behalf of the transferee | Use an authorised signatory |
The law behind it
Section 235(1) applies where a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company has, within four months after the making of an offer by the transferee company, been approved by the holders of not less than nine-tenths in value of the shares whose transfer is involved, other than shares already held at the date of the offer by, or by a nominee of, the transferee company or its subsidiary companies. The transferee company may, at any time within two months after the expiry of the four months, give notice in the prescribed manner to any dissenting shareholder that it desires to acquire his shares.
Section 235(2) says that where notice is given, the transferee company is entitled and bound to acquire those shares on the terms on which, under the scheme or contract, the shares of the approving shareholders are to be transferred, unless on an application by the dissenting shareholder to the Tribunal within one month from the date on which the notice was given, the Tribunal thinks fit to order otherwise. Section 235(3) says that on the expiry of that month, or after any pending application is disposed of, the transferee company sends a copy of the notice to the transferor company with an instrument of transfer, executed on behalf of the shareholder by a person appointed by the transferor company and on its own behalf by the transferee, and pays or transfers the consideration to the transferor company, which registers the transferee as holder and, within one month of the registration, informs the dissenting shareholders of the registration and receipt of the consideration. Section 235(4) says the sum received by the transferor is paid into a separate bank account, held in trust for the persons entitled and disbursed to them within sixty days.
The Explanation to the section says a "dissenting shareholder" includes a shareholder who has not assented to the scheme or contract and any shareholder who has failed or refused to transfer his shares in accordance with it. The rules prescribe the manner of notice; they are not reproduced here. Check the current rules and form before use.
Who signs and how it is given
The transferee company signs through an authorised signatory and gives the notice to each dissenting shareholder in the manner prescribed, at the address registered with the transferor company, keeping proof of dispatch and delivery because the one-month period runs from the date of notice. No stamp duty applies to the notice itself; the instrument of transfer and any share transfer paper may attract duty under State and central stamp law. See our stamp duty overview.
Common mistakes
- Giving the notice outside the two months that follow the four-month approval period.
- Counting shares already held by the transferee or its nominees or subsidiaries in the nine-tenths.
- Offering a price different from the price paid to the approving shareholders.
- Not telling the shareholder of the right to apply to the Tribunal within one month.
- Sending the notice to an address other than that registered with the transferor company.
- Not keeping proof of the date of notice.
- Paying the consideration into an account that is not separate, contrary to section 235(4).
- Failing to disburse to the shareholders within sixty days.
Need help with a share acquisition notice?
The windows under section 235 are tight and the notice must carry the right price and warning. Our team can prepare the notice, calculate the periods and handle the registration and payment steps. See compliance documentation. For a related Tribunal route, read our petition to sanction a scheme (Form CAA.5).
Key takeaways
- Nine-tenths in value approval within four months of the offer opens the right.
- Give notice within two months after those four months.
- The dissenting shareholder has one month to apply to the Tribunal.
- The price is the price under the scheme or contract for approving shareholders.
- The consideration is held in a separate account and disbursed within sixty days.
Read next
- Section 236: purchase of minority shareholding
- Section 230: compromise and arrangement
- Section 232: merger and amalgamation
- Notice inviting objections to a fast track merger (Form CAA.9)
Disclaimer: This specimen is a general model for information. Every document must be adapted to its facts and to the law, rules and forms in force when it is signed or filed; stamp duty, registration and court fees depend on the State and the forum. This article is general information, not legal advice; check the official text before acting.