Section 238 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 238 sets the disclosure and registration rules for an offer under section 235, where a transferee company offers to take over the shares of a transferor company and wants the power to acquire dissenting shareholders' shares. The circular carrying the offer must contain prescribed information, state how cash will be arranged, and be registered with the Registrar before it is issued.
For every offer of a scheme or contract involving transfer of shares under section 235, the directors' circular to members must carry prescribed information, the offer must include a statement on the steps taken to ensure cash is available, and the circular must be presented to the Registrar and registered before it is issued. The Registrar may refuse, with written reasons, within thirty days, and an appeal lies to the Tribunal. A director who issues an unregistered circular is liable to a penalty of one lakh rupees.
The background: what section 235 allows
Section 238 only makes sense with section 235 beside it. Section 235 deals with a scheme or contract where a transferee company offers to acquire the shares of a transferor company. If, within four months after the offer, holders of not less than nine-tenths in value of the shares involved (leaving out shares the transferee or its nominee or subsidiaries already held at the date of the offer) approve it, the transferee company may, within two months after those four months, give notice to a dissenting shareholder that it wants to acquire his shares. Section 235 then sets the rules for the acquisition, the Tribunal's role on the dissenting shareholder's application, and the handling of the money.
Section 238 is the paperwork gate in front of that process. It does not decide whether the offer is fair. It makes sure members get the prescribed information and that the circular has passed through the Registrar.
Sub-section (1): three requirements
| Clause | Requirement | What the text says |
|---|---|---|
| (a) | Information | "every circular containing such offer and recommendation to the members of the transferor company by its directors to accept such offer shall be accompanied by such information and in such manner as may be prescribed" |
| (b) | Cash statement | "every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available" |
| (c) | Registration | "every such circular shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered" |
Note who does what. The circular with the recommendation is issued by the directors of the transferor company to its members. The cash statement is made by or on behalf of the transferee company. The circular cannot go out until the Registrar has registered it. The details of the prescribed information are in the rules, so check the current rules for content and format.
A transferee company that is buying shares in return for cash should therefore be ready to show its funding arrangements at the circular stage. Our share transfer team can help you prepare the documents that go with an offer of this kind.
The Registrar's power to refuse
The proviso to sub-section (1) lets the Registrar, "for reasons to be recorded in writing", refuse to register a circular in two cases:
- It does not contain the information required under clause (a); or
- It sets out that information "in a manner likely to give a false impression".
The Registrar must communicate the refusal to the parties "within thirty days of the application". The text does not say what happens if the Registrar stays silent within that period, so do not assume any deemed registration.
Sub-section (2): appeal to the Tribunal
"An appeal shall lie to the Tribunal against an order of the Registrar refusing to register any circular under sub-section (1)." The text does not state a time limit for the appeal, so check the Tribunal's rules and procedure for the period and form.
Sub-section (3): penalty for an unregistered circular
The director who issues a circular that has not been presented for registration and registered under clause (c) of sub-section (1) "shall be liable to a penalty of one lakh rupees".
The footnote in the consolidated text shows that this wording was substituted by Act 22 of 2019 (with effect from 2 November 2018). The earlier text was "punishable with fine which shall not be less than twenty-five thousand rupees but which may extend to five lakh rupees". So the penalty is now a fixed one lakh rupees, not a range, and it is a penalty rather than a fine. The liability falls on the director who issues the circular.
How section 238 differs from related sections
| Section | Subject | Key idea |
|---|---|---|
| 235 | Acquiring dissenting shareholders' shares | Nine-tenths approval within four months, then notice within two months |
| 236 | Purchase of minority shareholding | A 90 per cent holder must offer to buy the rest at a registered valuer's price; see section 236 |
| 238 | Registration of the offer circular | Prescribed information, cash statement, prior registration, penalty of one lakh rupees |
Section 236 is triggered by holding and is not tied to an offer circular. Section 238 applies to an offer made under section 235.
Proposed change
We checked the Corporate Laws (Amendment) Bill, 2026 for an amendment to section 238, and to sections 235 and 236, and found none. The Bill is pending and is not law as on 30 September 2026.
Practical examples
Example 1: the circular goes out early. A transferor company's directors send members a circular recommending a takeover offer before the Registrar has registered it. Sub-section (3) makes the issuing director liable to a penalty of one lakh rupees.
Example 2: refusal for a misleading presentation. The circular lists the information required but presents it in a way likely to give a false impression. The Registrar refuses in writing within thirty days. The parties may appeal to the Tribunal under sub-section (2).
Example 3: no funding statement. The transferee company's offer says nothing about how it will arrange cash. Clause (b) requires a statement on the steps taken to ensure necessary cash will be available, so the offer is incomplete.
Need help with a share-transfer offer?
If you are planning or receiving an offer to acquire the shares of a company, the circular, the funding statement and the Registrar's registration all need to be in order before anything is issued. We can review your draft circular and supporting papers. Contact our team about a share transfer.
Key takeaways
- Section 238 applies to offers under section 235.
- The directors' circular must carry the prescribed information.
- The transferee company's offer must state the steps taken to ensure cash will be available.
- The circular must be registered by the Registrar before it is issued.
- Refusal must be in writing, with reasons, within thirty days, and is appealable to the Tribunal.
- The issuing director is liable to a penalty of one lakh rupees if the circular is not registered.
Read next
- Section 236: Purchase of minority shareholding
- Section 239: Preservation of books after amalgamation
- Section 234: Merger with a foreign company
- Section 56: Transfer and transmission of securities
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.