Section 236 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 236 deals with what happens when one person, or a group, ends up holding 90 per cent or more of a company's issued equity share capital. That holder must notify the company of the intention to buy the remaining shares and must offer to buy them at a price fixed by a registered valuer. The minority can also make the offer the other way.
When an acquirer, a person acting in concert, or any person or group becomes the registered holder of 90 per cent or more of the issued equity share capital, by amalgamation, share exchange, conversion of securities or any other reason, they shall notify the company of their intention to buy the remaining equity shares and offer to buy them at a price based on valuation by a registered valuer. The minority may also offer their shares to the majority at that price. The buyer must deposit the full price in a separate bank account operated by the company whose shares are being transferred.
When the section is triggered
Sub-section (1) applies in either of two situations:
- An acquirer, or a person acting in concert with the acquirer, becomes the registered holder of 90 per cent or more of the issued equity share capital of a company; or
- Any person or group of persons becomes a 90 per cent majority, or holds 90 per cent of the issued equity share capital, "by virtue of an amalgamation, share exchange, conversion of securities or for any other reason".
The words "for any other reason" make the trigger wide. It does not matter how the holding got to 90 per cent. The threshold is measured against issued equity share capital, so preference shares and debt do not count in the calculation.
The Explanation says that "acquirer" and "person acting in concert" have the meanings in regulation 2(1)(b) and (e) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. That is the text's own reference. Those 1997 Regulations have since been replaced by later SEBI takeover regulations, so check how the reference is read today.
Sub-sections (1) to (3): the obligation and the offer
| Step | Who | What the text says |
|---|---|---|
| Notify | The 90% holder(s) | "shall notify the company of their intention to buy the remaining equity shares" (sub-section (1)) |
| Offer | The 90% holder(s) | "shall offer to the minority shareholders" to buy their equity shares at a price "determined on the basis of valuation by a registered valuer in accordance with such rules as may be prescribed" (sub-section (2)) |
| Minority's offer | The minority | May offer to the majority to purchase the minority shareholding, at the price determined under sub-section (2) (sub-section (3)) |
The majority cannot decide the price on its own. It must come from a registered valuer under the prescribed rules. For the valuer framework, see our articles on registered valuers under the Companies Act and the Registered Valuers Rules, 2017. The detailed procedure, such as how and when the offer is made, sits in rules. Rule 26 of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016 deals with this, and Rule 26A covers shares held in dematerialised form. The rules are not part of the Act's text, so confirm their current wording before relying on them.
Sub-section (3) is the feature that makes the section two-way. A minority holder who would like to leave is not left waiting for the majority to act. The provision lets minority shareholders offer their holding to the majority, at the same valuer-based price.
A holder in this position should plan the buyout early. A share transfer needs valuation, payment and documentation to line up, and this section adds a deposit requirement on top.
Sub-sections (4) to (6): deposit, payment and delivery
- Deposit (sub-section (4)). The majority shareholders "shall deposit an amount equal to the value of shares to be acquired" under sub-section (2) or (3) in a separate bank account, "to be operated by the company whose shares are being transferred", for at least one year, for payment to the minority. The amount is to be disbursed to the entitled shareholders within sixty days.
- Continued disbursement (proviso). Disbursement continues for one year for shareholders who, for any reason, were not paid within the sixty days, or who did not receive or claim payment.
- Company as transfer agent (sub-section (5)). The company "shall act as a transfer agent for receiving and paying the price to the minority shareholders and for taking delivery of the shares and delivering such shares to the majority".
- Shares not delivered (sub-section (6)). If shareholders do not physically deliver shares within the time the company specifies, the share certificates "shall be deemed to be cancelled". The company is then authorised to issue shares in lieu of the cancelled shares, complete the transfer in accordance with law and pay the price out of the deposit made under sub-section (4), by dispatch of payment.
The footnotes in the consolidated text show that in sub-sections (4), (5) and (6) the words "company whose shares are being transferred" were substituted for "transferor company" by Act 1 of 2018 (with effect from 9 February 2018). That correction matters: the account is operated by the company whose shares are being bought, not by an unrelated party.
Sub-section (7): shareholders who cannot be found
Where a majority shareholder requires a full purchase and pays the price by deposit with the company for any shareholder who has died or ceased to exist, or whose heirs, successors, administrators or assignees have not been brought on record by transmission, "the right of such shareholders to make an offer for sale of minority equity shareholding shall continue and be available for a period of three years from the date of majority acquisition or majority shareholding".
Sub-section (8): sharing a higher price
If shares of the minority have been acquired under this section, and on or before the date of transfer following that acquisition, shareholders holding 75 per cent or more of the minority equity shareholding negotiate or reach an understanding on a higher price for any transfer, proposed or agreed, of their shares, without disclosing the fact or likelihood of the transfer on that basis, the majority shareholders "shall share the additional compensation so received by them with such minority shareholders on a pro rata basis". This protects the smaller minority holders from a side deal struck by the larger ones.
Sub-section (9): delisting and the lapse of time do not end the right
If the majority shareholder fails to acquire the full purchase of the minority's shares, the provisions of the section "shall continue to apply to the residual minority equity shareholders", even though (a) the company's shares of the residual minority have been delisted, and (b) the period of one year, or the period specified in SEBI regulations, has elapsed.
Proposed change
We checked the Corporate Laws (Amendment) Bill, 2026 for an amendment to section 236 and found none. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: merger lifts holding to 91 per cent. After a merger, a parent ends up with 91 per cent of the equity of a subsidiary. Under sub-section (1) it must notify the company and, under sub-section (2), offer to buy the rest at a registered valuer's price.
Example 2: a minority wants out. A small shareholder holds 3 per cent of a company where the promoters hold 92 per cent. Sub-section (3) lets the shareholder offer the shares to the promoters at the valuer-based price.
Example 3: uncollected cheques. Some minority holders do not claim payment within sixty days. The proviso to sub-section (4) keeps disbursement open for a year, and the deposit must stay in the separate account for at least one year.
Need help with a minority buyout?
If you hold, or are about to cross, 90 per cent of a company's equity, or you are a small holder who wants to exit, the valuation, deposit and delivery steps need to be handled in order. Our team can walk you through them. Start with a share transfer discussion.
Key takeaways
- The trigger is holding 90 per cent or more of the issued equity share capital, by any route.
- The majority must notify the company and offer to buy the remaining equity shares.
- The price is based on a registered valuer's valuation under the prescribed rules.
- The minority can also offer its shares to the majority.
- The full price is deposited in a separate account operated by the company whose shares are being transferred, for at least one year, with payment within sixty days.
- Sub-sections (7), (8) and (9) protect missing holders, the smaller minority and residual holders after delisting.
Read next
- Section 238: Registration of offers involving transfer of shares
- Section 234: Merger with a foreign company
- Section 232: Merger and amalgamation
- Oppression and mismanagement under section 241
Disclaimer: Based on the Companies Act, 2013 as amended up to 1 April 2021 (official consolidated text), read with later developments noted in the article; proposals in the Corporate Laws (Amendment) Bill, 2026 are pending and not law as on 30 September 2026. Verify current notifications and rules before acting.