Rules 26 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.
These three rules work the Act's provisions on acquiring shares of dissenting shareholders (section 235) and buying out the minority (section 236). Rule 26 requires a CAA.14 notice, rule 26A sets the step-by-step procedure for shares held in demat form, and rule 27 says how the registered valuer determines the offer price. This article reads them as amended up to G.S.R. 603(E) dated 4 September 2025 per the MCA e-book; later amendments should be checked.
The transferee company sends dissenting shareholders of the transferor a notice in Form CAA.14 at their last intimated address (rule 26). For a minority buy-out of demat shares, the company verifies holders within two weeks of receiving the price amount, then gives notice of a cut-off date at least one month later (rule 26A). A registered valuer fixes the offer price: for a listed company by SEBI's regulations, and for an unlisted or private company on the highest price paid in the last twelve months and a fair price (rule 27).
Rule 26: notice to dissenting shareholders
For section 235(1), the transferee company sends the notice to the dissenting shareholder or shareholders of the transferor company in Form CAA.14, at the last intimated address of each, for acquiring their shares. Our format note on the notice to dissenting shareholders in CAA-14 shows how it is drafted. The Schedule of Fees prints a fee for an application by dissenting shareholders under section 235(2); that fee is quoted in a later article of this series on the Schedule of Fees. If you are planning a buy-out and want the process reviewed against the rules, our financial and legal due diligence team can help.
Rule 26A: purchase of minority shareholding held in demat form
Rule 26A, inserted from 17 December 2020, applies where shares are bought out under section 236. The steps are in order.
- Verification (26A(1)). Within two weeks from the date of receipt of the amount equal to the price of the shares to be acquired, the company verifies the details of minority shareholders holding in dematerialised form.
- Notice (26A(2)). The company sends notice to those shareholders by registered post, speed post, courier or e-mail of a cut-off date, not earlier than one month after the date of sending the notice, on which their shares will be debited and credited to the company's designated demat account, unless the shares are credited to the acquirer's account before the cut-off date.
- Publication (26A(3)). A copy of the notice is published at the same time in two widely circulated newspapers, one English and one vernacular, in the district of the registered office, and uploaded on the company's website, if any.
- Depository informed (26A(4)). Immediately after publication, the company informs the depository of the cut-off date and submits declarations that the corporate action is under section 236; that shareholders have been informed (with the notice and the newspaper publication attached); that they will be paid immediately after the corporate action; and that any dispute or complaint from it is the company's sole responsibility.
- Authority (26A(5)). The Board authorises the Company Secretary, or in his absence any other person, to inform the depository and submit the documents.
- Transfer (26A(6)). On the cut-off date the depository transfers the shares of minority shareholders who have not transferred on their own into the company's designated demat account and intimates the company.
- Payment (26A(7)). The company immediately pays the price to each minority shareholder after deducting the applicable stamp duty, which the company pays on their behalf under the Indian Stamp Act, 1899.
- Onward transfer (26A(8)). After payment, the company tells the depository to move the shares to the acquirer's demat account.
The Explanation to sub-rule (8) says the company continues to pay entitled shareholders where payment could not be made in time, and transfers the shares to the acquirer after such payment. Rule 26A(9) says the depository does not transfer shares where a specific order of a Court, Tribunal or statutory authority restrains transfer and payment of dividend, or where shares are pledged or hypothecated under the Depositories Act, 1996. A cut-off date falling on a holiday moves to the next working day.
Rule 26A names the Indian Stamp Act, 1899 as printed. Check the current stamp law applicable before computing any deduction.
The Act's side of the process is explained in purchase of minority shareholding: squeeze-out under section 236; where the shares have been moved to the investor protection fund, see the series note on transfer of shares to IEPF.
Rule 27: determining the offer price
For section 236(2), the registered valuer determines the offer price to be paid by the acquirer, person or group of persons referred to in section 236(1) for the equity shares of the minority shareholders.
| Case | How the price is fixed |
|---|---|
| Listed company | (i) The offer price is determined as specified by the Securities and Exchange Board of India under its relevant regulations, as applicable. (ii) The registered valuer also gives a valuation report on the basis of valuation, addressed to the board of directors of the company, justifying the valuation |
| Unlisted company and private company | (i) The offer price is determined after taking into account (a) the highest price paid by the acquirer, person or group of persons in the last twelve months, and (b) the fair price determined by the registered valuer on parameters including return on net worth, book value of shares, earning per share, price earning multiple against the industry average and other customary parameters. (ii) The valuer also gives a valuation report addressed to the board of directors justifying the valuation |
Rule 27 does not fix a price or a formula in rupees. The valuer's parameters are those in the table.
Example
Sagar Textiles Limited, an unlisted company, has an acquirer holding the large majority of its shares. The acquirer deposits the price amount with the company, which verifies its demat minority holders within two weeks. It sends notice by e-mail and speed post of a cut-off date a month and a week away, publishes the notice in English and vernacular newspapers and informs the depository with the four declarations. On the cut-off date the depository moves the shares into the company's designated account, the company pays each holder less stamp duty, and the shares then move to the acquirer.
Need help with a minority buy-out?
The valuation report, the notice pack and the depository declarations have to agree, and the cut-off date drives the timetable. For help organising this work, you can contact our team through financial and legal due diligence.
Key takeaways
- Rule 26 requires a Form CAA.14 notice to dissenting shareholders at their last intimated address.
- The company verifies demat holders within two weeks of receiving the price amount.
- The cut-off date is not earlier than one month after the notice is sent; a holiday moves it to the next working day.
- The notice is published in an English and a vernacular newspaper in the district of the registered office.
- The registered valuer fixes the price: by SEBI's regulations for a listed company, and on the twelve-month highest price and a fair price for an unlisted or private company.
Read next
- Rule 25A: cross-border mergers
- Rules 28 and 29: takeover circular, appeal and the Schedule of Fees
- Section 236: purchase of minority shareholding
- Notice to dissenting shareholders: CAA-14 format
Disclaimer: Based on the Companies Act, 2013 rules named above as consolidated in the MCA e-book (consulted on 3 October 2026), with the later notifications the article names. Later amendments, fees, forms and the Companies Act, 2013 provisions referred to should be checked. This article is general information, not legal advice; check the official text before acting.