Consequent to the amendments to the MRTP Act, certain
provisions relating to restrictions on transfer of shares have been transferred
to the Companies Act as Ss.108A to 108L Details of these sections are as
follows:
Restriction on acquisition
of certain shares (s.108A). Section 108,{ prohibits the holding of more
than 25% of the paid-up share capital of a company without the previous
approval of the Central Government. In this regard the section provides:
(1) Except
with the previous approval of the Central Government, no individual, firm, group,
constituent of a group, body corporate or bodies corporate under the same management,
shall jointly or severally acquire or agree to acquire, whether in his or its own
name or in the name of any other person, any equity shares in a public company,
or a private company which is subsidiary of a public company, if the total
nominal value of the equity shares intended to be so acquired exceeds, or would
together with the total nominal value of any equity shares already held in the
company by such individual, firm, group, constituent of a group, body corporate
or bodies corporate under the same management, exceed 25% of the paid-up equity
share capital of such company.
(2) Where
the Central Government prohibits any person under Sub-s.(1) to acquire any
shares of a public or private subsidiary company, then even the following have been disallowed, except with the
previous approval of the Central Government, to transfer or agree to transfer
shares of such a company if such person (acquirer) is: (a) a company in which
51% or more of the share capital is held by the Central Government or (b)
Corporation (not being a company) established by or under any Central Act; or
(c) financial institution.
Restriction on
transfer of shares (s.1.088). (1) Every body corporate or bodies corporate under
the same management which holds, where singly or in the aggregate, l0% or more
of the nominal value of the subscribed equity share capital of any other company
must before transferring one or more of such shares, give to the Central Government
an intimation of its or their proposal to transfer such share. Further, every
such intimation must include a statement as to the particulars of the shares proposed
to be transferred, the name and address of the person to whom the shares are proposed
to be transferred, the shareholding, if any, of the proposed transferee in the concerned
company and such other particulars as may be prescribed.
(2) Where,
on receipt of the intimation or otherwise, the Central Government is satisfied
that as a result of such transfer, a change in the composition of the Board of Directors
of the company is likely to take place and that such change would be prejudicial
to the interests of the company or to the public interest, it may issue any of the
following orders:
(a) No such share shall be transferred to the
proposed transferee. However, noSuch
order shall preclude the body corporate or bodies corporate from intimating, to the Central Government,
its or their proposal to transfer the share
to any other person, or
(b) where such share is held in a
company engaged in any industry specified in Schedule
XV, such share shall be transferred to the Central Government or to such Corporation owned or controlled
by that Government as maybe specified in
the direction.
(3) Where a direction is made by the Central
Government under clause (b) above, the share referred to in such direction
shall stand transferred to the Central
Government or to the Corporation specified therein and the
Central Government or the specified Corporation, as the case may be, shall pay
in cash, to the body corporate or bodies corporate from which such share stands
transferred, an amount, equal to the market value of such share, within the
time specified below.
Explanation. The
term "market value" means, in the case of a share which is quoted on
any recognised stock exchange, the value quoted at such stock exchange, on the date
immediately proceeding the date on which the direction is made and, in any
other case, such value as may be mutually agreed upon between the holder of the
share and the Central Government or the specified Corporation, as the case may
be, or in the absence of such agreement, as may be determined by the Court.
(4) The
market value shall be given forthwith, where there is no dispute as to such
value or where such value has been mutually agreed upon, but where there is a
dispute as to the market value, such value as is estimated by the Central Government
or the Corporation, as the case may be, shall be given forthwith and the
balance, if any, shall be given within thirty days from the date when the
market value is determined by the Court.
(5) If the
Central Government does not make any direction under (2) within sixty days from
the date of receipt by it of the intimation given under (1), the provisions contained
in sub-s. with regard to the transfer of such shares shall not apply.
Resolution on the
transfer of shares of foreign companies. Section 108C prohibits any
body corporate or bodies corporate under the same
management, which holds, or hold in the aggregate, 10% or more of the nominal
value of the equity share capital of a foreign company, having an established
place of business in India, to transfer any share in such foreign company to
any citizen of India or any body corporate incorporated in India except with
the previous approval of the Central Government. The Central Government shall
however not refuse such permission unless it is of opinion that such transfer
would be prejudicial to the public interest.
Power of central Government to direct companies not to give
to the transfer (s.108D).
(1) Where
the Central Government is satisfied that as a result of the transfer of any
share or block of shares of a company, a change in the controlling interest of the
company is likely to take place and that such change would be prejudicial to the
interest of a company or to the public interest, that Government may direct the
company not to give effect to the transfer of any such share or block of shares
and-(a) where the transfer of such share or block of shares has already been
registered, not to permit the transferee or any nominee or proxy of the
transferee, to exercise any voting or other rights attaching to such share or
block of shares; and (b) where the transfer of such share or block of shares
has not been registered, not to permit any nominee or proxy of the transferor to
exercise any voting or other rights attaching to such share or block of shares.
(2) Where
any direction is given by the Central Government under (1), the share or the
block of shares referred to therein shall stand retransferred to the person from
whom it was acquired and thereupon the amount paid by the transferee for the acquisition
of such share or block of shares shall be refunded to him by the person to whom
such share or block of shares stands or stand retransferred.
(3) If the
refund referred to in (2) is not made within the period of thirty days from the
date of the direction referred to in (1), the Central Government shall, on the
application of the person entitled to get the refund, direct, by order the
refund of such amount and such order may be enforced as if it were a decree
made by a civil court.
(4) The
person of whom any share or block of shares stands or stand retransferred under
(2) shall, on making refund under (2) or (3), be eligible to exercise voting or
other rights attaching to such share or block of shares.
Time within which
refusal to be communicated (s.108E). Every request made to the
Central Government for according its approval to the
proposal for the acquisition of any share referred to in s.108A or the transfer
of any share referred to in s.108C shall
be presumed to have been granted unless within a period of
sixty days from the date of receipt of such request the Central Government communicates
to the person by whom the request was made that the approval prayed for cannot
be granted.
Nothing in s.108A to
108D to apply to government companies, etc. (s.108F). Nothing
contained in s.108A [except sub-s.(2) thereof] shall apply
to the transfer of any share to and nothing in s. 108B or s.108C or s.108D
shall apply to the transfer of any share by- (a) any company in which not less
than 51% of the share capital is held by the Central Government; (b) any
Corporation (not being a company) established by or under any Central Act; (c)
any financial institution.
Applicability of the provisions of sections 108A to 108F
(s.108G). The provisions of Ss.108 to 108F (both inclusive) shall apply to the
acquisition or transfer of shares or share capital by, or to, an individual,
firm, group, constituent of a group, body corporate or bodies corporate under
the same management, who or which-
(a) is, in
case of acquisition of shares or share capital, the owner in relation to a dominant
undertaking and there would be, as a result of such acquisition, any increase-
(i) in the production, supply, distribution or control of any goods that are
produced, supplied, distributed or controlled in India or any substantial part
thereof by that dominant undertaking., or (ii) in the provision or control of
any services that are rendered in India or any substantial part thereof by that
dominant undertaking, or
(b) would
be, as a result of such acquisition or transfer of shares or share capital, the
owner of a dominant undertaking; or
(c) is, in case of transfer of shares or share capital, the owner in relation to a dominant undertaking.
(c) is, in case of transfer of shares or share capital, the owner in relation to a dominant undertaking.
Construction of
certain expressions used is Ss. 108A to108G (s.108H). The expressions "group",
"same management”. “financial institution”, “dominant undertaking” and
“owner” used in Ss. 108A to 108G (both inclusive), shall have the meanings respectively
assigned to then in the Monopolies and restrictive trade practices Act, 1969.
Penalty for acquisition or transfer of shares in
contravention of Ss.108A to 10D
(s.108-I). Section 108I provides for penalties for non
compliance of provisions
contained in s.108A to 108D.
Nomination facility to
shareholders etc. The Companies (Amendment) Act, 1999 has
extended the nomination facility to the holders of shares,
debentures and fixed deposit holders. Two new Ss.109A and 109B have been
inserted.
Section 109A provides for nomination of shares. Every holder
of shares in, or holder of debentures of a company may, at any time, nominate,
in the prescribed manner a person to whom his shares in or debentures of, the
company shall rest in the event of his death. In case of joint holding, all of
them may nominate a person in whom the rights shall vest in the event of death
of all the joint holders.
Further, notwithstanding anything contained in any other law
for the time being in force or in any disposition, whether testamentary or
otherwise, the nominee shall become entitled to all the rights of the shares
etc., to the exclusion of all other persons, unless the nomination is varied or
cancelled in the prescribed manner.
In case the nominee is a minor, the holder of shares or
debentures may also nominate a person to become entitled in the event of death
of the minor, during the minority.
Section 109B provides
for transmission of shares. Any person who becomes a nominee by virtue of
the provision of s.109A, may elect either (a) to be registered himself as a
holder of the share or debentures; or (b) to transfer the share or debenture.
In the case of (a) he shall send to the company a notice in writing signed by
him to that effect accompanied by a death certificate of the deceased
shareholder or debenture holder. In case of (b), all the limitations,
restrictions and provisions of the Act relating to the right to transfer and
the registration of transfers shall be applicable.
Further, a person, being a nominee, becoming entitled to a
share or debenture by
reason of the death of the holder shall be entitled to the
same dividends and other advantages to which he would be entitled if he were
the registered holder himself.
However, he shall not, before being so registered, be
entitled to exercise right conferred by membership in relation to meetings of
the company.
Furthermore, the company may, at any time, give notice
requiring any such person to elect either to be registered himself or to
transfer the share or debenture. And if he does not comply with the notice
within 90 days the company may withhold payment of dividend, bonus or other
money payable to him, until the requirements of the notice have been complied
with.
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