Cadbury Buyback Case
Squeeze out of minority shareholders squeeze-out-of-minority-shareholders-1503-1.html Author : thass Published: June 17, 2013, 1:59 pm
Squeeze out of minority shareholders The law relating to reduction of share capital can be found in Section 100 to 105 of the Companies Act, 1956. The recent judgments in Elpro and Sanvik Asia have laid down that minority shareholders can be squeezed out without their consent, thereby creating an arena of jurisprudence in the favor of majority acquiring full rights to do whatever they will with the company. According to Punjab Distilleries India Ltd. v CIT, the following requirements have to be followed under section 100 of the Companies act: (i) A resolution has to be passed by the general body of the company (ii) Application has to filed with the court for confirmation (iii) After confirmation register with the Registrar of Joint Stock Companies. (iv) Issue notices to invite applications for refund of share capital (v) Distribute the proportionate share capital among each of the shareholders. British and American Trustee and Finance Corporation v. Couper is a leading authority on reduction of share capital which laid down that courts cannot go into the motive of reduction by the company. The judicial trend in this regard seems to show that Section 100 primarily is being used for more of objectionable objectives, for example in the leading case of Sandvik Asia the reason behind the Company’s reduction of share capital was to continue to remain a public company even after delisting of its shares, other reasons like reduction of administration costs , conversion to a private limited company in order to avoid greater regulations, are being widely used. Initially companies used Section 100 read with Section 391, however this practice was done away with in order to avoid the condition of a separate class meeting.
Page 1/11 http://www.legalservicesindia.com/article/
Prior to the court’s decision in Sandvik Asia, the
Squeeze out of minority shareholders The law relating to reduction of share capital can be found in Section 100 to 105 of the Companies Act, 1956. The recent judgments in Elpro and Sanvik Asia have laid down that minority shareholders can be squeezed out without their consent, thereby creating an arena of jurisprudence in the favor of majority acquiring full rights to do whatever they will with the company. According to Punjab Distilleries India Ltd. v CIT, the following requirements have to be followed under section 100 of the Companies act: (i) A resolution has to be passed by the general body of the company (ii) Application has to filed with the court for confirmation (iii) After confirmation register with the Registrar of Joint Stock Companies. (iv) Issue notices to invite applications for refund of share capital (v) Distribute the proportionate share capital among each of the shareholders. British and American Trustee and Finance Corporation v. Couper is a leading authority on reduction of share capital which laid down that courts cannot go into the motive of reduction by the company. The judicial trend in this regard seems to show that Section 100 primarily is being used for more of objectionable objectives, for example in the leading case of Sandvik Asia the reason behind the Company’s reduction of share capital was to continue to remain a public company even after delisting of its shares, other reasons like reduction of administration costs , conversion to a private limited company in order to avoid greater regulations, are being widely used. Initially companies used Section 100 read with Section 391, however this practice was done away with in order to avoid the condition of a separate class meeting.
Page 1/11 http://www.legalservicesindia.com/article/
Prior to the court’s decision in Sandvik Asia, the