Section 235 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.
Section 235 lets a company that has made an offer for shares in another company acquire the shares of holders who did not accept, once holders of at least nine-tenths in value of the shares involved have approved. The dissenting shareholder keeps a right to go to the Tribunal, and the money paid for the shares has to be held separately and passed on within a stated time.
If holders of not less than nine-tenths in value of the shares whose transfer is involved approve the scheme or contract within four months of the transferee company's offer, the transferee company may, within two months after those four months, give notice to any dissenting shareholder that it wants to acquire his shares. The shareholder may apply to the Tribunal within one month of the notice. If he does not, or the Tribunal does not order otherwise, the transferee company is entitled and bound to acquire the shares on the same terms as the approving shareholders. The transferor company must hold the price in a separate bank account, in trust, and disburse it within sixty days.
Where section 235 sits
Section 235 falls in Chapter XV (compromises, arrangements and amalgamations). The neighbouring provisions are section 236 on purchase of minority shareholding and section 238 on offers involving transfer of shares. Section 235 starts from a different place from each of them: it begins with an offer by one company for the shares of another that has already been approved by a very large majority, and gives the offeror a way to bring in the holdouts.
This article reads the section as printed in the Companies Act, 2013 as amended up to 29 July 2022 (the consolidated text consulted). The section carries no amendment footnote in that text, so it stands as enacted there. No later amendment was found in the texts consulted; later amendments should be checked on the official text.
If your deal involves an acquisition of shares and a dissenting block, our team can help through share transfer support, from the offer papers to the transfer instruments.
Sub-section (1): the approval and the notice
Sub-section (1) names two companies: the transferor company (whose shares are to be transferred) and the transferee company (the offeror). Its conditions are:
- A scheme or contract involving the transfer of shares, or a class of shares, in the transferor company to the transferee company.
- An offer made by the transferee company.
- Approval within four months after the making of the offer by 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, by a nominee of it, or by its subsidiary companies are left out of the count.
- Notice, in the prescribed manner, to any dissenting shareholder, that the transferee company desires to acquire his shares. The notice may be given at any time within two months after the expiry of the four months.
The definition of "dissenting shareholder" is in the Explanation at the end: it includes a shareholder who has not assented to the scheme or contract, and any shareholder who has failed or refused to transfer his shares to the transferee company in accordance with it.
The manner of the notice is for the rules. Our post on rules 26 and 27 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 covers the notice to dissenting shareholders and purchase of minority shareholding. A specimen notice is in our post on the notice to dissenting shareholders under section 235.
Sub-section (2): the shareholder's one-month window
Once notice is given, the transferee company is "entitled to and bound to acquire" the shares on the terms on which, under the scheme or contract, the approving shareholders' shares are to be transferred. The exception is where, on an application made 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. Two things follow from the wording: the terms are the same terms offered to the approving holders, and the dissenting shareholder's remedy is an application to the Tribunal within the one month.
Sub-section (3): instrument of transfer, payment and registration
If notice has been given and the Tribunal has made no order to the contrary, the transferee company acts "on the expiry of one month from the date on which the notice has been given", or, if an application by the dissenting shareholder is then pending, after that application has been disposed of. It then:
- sends a copy of the notice to the transferor company with an instrument of transfer, executed on behalf of the shareholder by any person appointed by the transferor company and on its own behalf by the transferee company; and
- pays or transfers to the transferor company the amount or other consideration representing the price payable for the shares.
The transferor company then must (a) register the transferee company as holder of those shares and (b) within one month of the date of registration, inform the dissenting shareholders of the registration and of the receipt of the amount or other consideration payable to them.
Sub-section (4): the money in trust
Any sum received by the transferor company under the section must be paid into a separate bank account. The sum, and any other consideration received, is held by that company in trust for the several persons entitled to the shares, and "shall be disbursed to the entitled shareholders within sixty days".
Sub-section (5): offers made before commencement of the Act
For an offer made before the commencement of the Act, the section takes effect with two modifications. In sub-section (1), the words about excluding shares held by the transferee company or its nominee or subsidiaries are replaced by "the shares affected". In sub-section (3), certain words about the instrument of transfer are omitted. The words to be omitted under clause (b) are printed with the transferor and transferee roles in the opposite order from sub-section (3); read sub-section (5) as printed and do not assume it matches sub-section (3) word for word.
Periods and actors at a glance
| Sub-section | What it says | Who acts | Period as printed |
|---|---|---|---|
| (1) | Approval of the scheme or contract by holders of not less than nine-tenths in value | Approving shareholders | Within four months after the offer |
| (1) | Notice that the transferee company desires to acquire the shares | Transferee company | Within two months after the expiry of the four months |
| (2) | Application to the Tribunal against acquisition | Dissenting shareholder | Within one month from the date of notice |
| (3) | Copy of notice, instrument of transfer and payment sent to the transferor company | Transferee company | On expiry of one month from notice, or after a pending application is disposed of |
| (3)(b) | Inform dissenting shareholders of registration and receipt of price | Transferor company | Within one month of registration |
| (4) | Separate bank account, held in trust, disbursed to entitled shareholders | Transferor company | Within sixty days |
| (5) | Modified application to offers made before commencement of the Act | Transferee company | As above, with the modifications |
Worked example
Sunrise Components Limited (the transferee company) makes an offer to the shareholders of Valley Fasteners Limited (the transferor company) to acquire all of their shares on the same terms. Within four months of the offer, holders of more than nine-tenths in value of the shares whose transfer is involved approve. Sunrise already held a small block through a nominee at the date of the offer; that block is left out of the count, as sub-section (1) provides.
One holder, Mr Desai, has not responded. Sunrise's company secretary gives him notice, in the prescribed manner, within the two months after the four months expire. Mr Desai does not apply to the Tribunal within one month. On the expiry of that month Sunrise sends a copy of the notice and an instrument of transfer to Valley Fasteners and pays or transfers the price to it. Valley Fasteners registers Sunrise as holder, and within one month of registration informs Mr Desai that this has been done and that the price has been received. The price goes into a separate bank account held in trust and is disbursed to Mr Desai within sixty days.
Common mistakes
- Counting the shares already held by the offeror. Sub-section (1) excludes shares held at the date of the offer by the transferee company, its nominee or its subsidiary companies.
- Giving notice outside the two months. The notice is to be given within two months after the expiry of the four months.
- Acting before the shareholder's month has run. The transferee company moves after one month from the notice, or after a pending application has been disposed of.
- Mixing the price into the transferor company's own funds. Sub-section (4) requires a separate bank account and a trust.
- Missing the sixty days. The sum is to be disbursed to entitled shareholders within sixty days.
- Treating section 235 as the same as section 236. The two start from different facts; read both.
Need help with a share acquisition involving dissenting holders?
If you are planning an offer, chasing holdouts, or preparing the instruments of transfer and the trust account, we can walk through the timeline with you. Our share transfer team can prepare the notices and transfer papers and track each window.
Key takeaways
- Nine-tenths in value approval within four months of the offer is the gateway.
- Notice to dissenting shareholders is within two months after the four months, in the prescribed manner.
- The dissenting shareholder has one month from the notice to apply to the Tribunal.
- If no order to the contrary, the transferee company is entitled and bound to acquire on the approving holders' terms.
- The price is held by the transferor company in trust in a separate bank account and disbursed within sixty days.
- Sub-section (5) has its own modified reading for offers made before commencement of the Act.
Read next
- Section 236: purchase of minority shareholding
- Section 238: offers involving transfer of shares
- Section 237: the Central Government's power to order amalgamation in the public interest
- Section 334: transfers of shares after commencement of a winding up by the Tribunal
Disclaimer: Based on the Companies Act, 2013 as amended up to 29 July 2022 (the consolidated text consulted on 4 October 2026). Later amendments to the Act, the rules made under it and the Insolvency and Bankruptcy Code, 2016 should be checked. This article is general information, not legal advice; check the official text before acting.