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COMPANIES ACT 1963 - SECT 204 Power to acquire shares of shareholders dissenting from scheme or contract which has been approved by majority.

204.—(1) Subject to subsection (2), where a scheme, contract or offer involving the acquisition by one company, whether a company within the meaning of this Act or not (in this section referred to as "the transferee company") of the beneficial ownership of all the shares (other than shares already in the beneficial ownership of the transferee company) in the capital of another company, being a company within the meaning of this Act (in this section referred to as "the transferor company") has become binding or been approved or accepted in respect of not less than four-fifths in value of the shares affected not later than the date 4 months after publication generally to the holders of the shares affected of the terms of such scheme, contract or offer, the transferee company may at any time before the expiration of the period of 6 months next following such publication give notice in the prescribed manner to any dissenting shareholder that it desires to acquire the beneficial ownership of his shares, and when such notice is given the transferee company shall, unless on an application made by the dissenting shareholder within one month from the date on which the notice was given, the court thinks fit to order otherwise, be entitled and bound to acquire the beneficial ownership of those shares on the terms on which under the scheme, contract or offer, the beneficial ownership of the shares in respect of which the scheme, contract or offer has become binding or been approved or accepted is to be acquired by the transferee company.

(2) Where shares in the transferor company are, at the date of such publication, already in the beneficial ownership of the transferee company to a value greater than one-fifth of the aggregate value of those shares and the shares affected, subsection (1) shall not apply unless the assenting shareholders besides holding not less than four-fifths in value of the shares affected are not less than three-fourths in number of the holders of those shares.

(3) For the purpose of this section, shares in the transferor company in the beneficial ownership of a subsidiary of the transferee company shall be deemed to be in the beneficial ownership of the transferee company, the acquisition of the beneficial ownership of shares in the transferor company by a subsidiary of the transferee company shall be deemed to be the acquisition of such beneficial ownership by the transferee company and shares shall not be treated as not being in the beneficial ownership of the transferee company merely by reason of the fact that those shares are or may become subject to a charge in favour of another person.

(4) Where, in consequence of any such scheme, contract or offer, the beneficial interest in shares in the transferor company is acquired by the transferee company and as a result of such acquisition the transferee company has become the beneficial owner of four-fifths in value of all the shares in the transferor company then—

( a ) the transferee company shall, within one month of the date of such acquisition, give notice of that fact in the prescribed manner to all holders of shares in the transferor company not in the beneficial ownership of the transferee company; and

( b ) any such holder may, within 3 months from the giving of the notice to him, require the transferee company to acquire his shares;

and, where a shareholder gives notice under paragraph (b) in relation to any shares, the transferee company shall be entitled and bound to acquire the beneficial ownership of those shares on the terms on which under the scheme, contract or offer the beneficial ownership of the shares of the assenting shareholders was acquired by it, or on such other terms as may be agreed or as the court on the application either of the transferee company or of a shareholder thinks fit to order, and subsections (5), (6) and (7) shall be applicable mutatis mutandis as if any reference therein to a notice given under subsection (1) were a reference to a notice given under paragraph (b).

(5) Where a notice has been given by the transferee company under subsection (1) and the court has not, on application made by the dissenting shareholder, ordered to the contrary, the transferee company shall, on the expiration of one month from the date on which the notice was given, or, if an application to the court by the dissenting shareholder is then pending, after that application has been disposed of, transmit to the transferor company a copy of the notice together with an instrument of transfer of the shares of the dissenting shareholder executed on behalf of the dissenting shareholder as transferor by any person appointed by the transferee company and by the transferee (being either the transferee company or a subsidiary of the transferee company or a nominee of the transferee company or of such a subsidiary) and pay to or vest in the transferor company the amount or other consideration representing the price payable by the transferee company for the shares the beneficial ownership of which by virtue of this section the transferee company is entitled to acquire, and the transferor company shall thereupon register as the holder of those shares the person who executed such instrument as the transferee, so however, that an instrument of transfer shall not be so required for any share for which a share warrant is for the time being outstanding.

(6) Any sums received by the transferor company under this section shall be paid into a separate bank account and any such sums and any other consideration so received shall be held by that company on trust for the several persons entitled to the shares in respect of which the said sums or other consideration were respectively received.

(7) The transferor company or a nominee of the transferor company shall not be entitled to exercise any right of voting conferred by any shares in the transferee company issued to it or to its nominee as aforesaid except by and in accordance with instructions given by the shareholder in respect of whom those shares were so issued or his successor in title.

(8) In this section, "the shares affected" means the shares the acquisition of the beneficial ownership of which by the transferee company is involved in the scheme, contract or offer, "assenting shareholder" means a holder of any of the shares affected in respect of which the scheme, contract or offer has become binding or been approved or accepted and "dissenting shareholder" means a holder of any of the shares affected in respect of which the scheme, contract or offer has not become binding or been approved or accepted or who has failed or refused to transfer his shares in accordance with the scheme, contract or offer.

(9) Where the scheme, contract or offer becomes binding on or is approved or accepted by a person in respect of a part only of the shares held by him, he shall be treated as an assenting shareholder as regards that part of his holding and as a dissenting shareholder as regards the remainder of his holding.

(10) Where the scheme, contract or offer provides that an assenting shareholder may elect between 2 or more sets of terms for the acquisition by the transferee company of the beneficial ownership of the shares affected, the notice given by the transferee company under subsection (1) shall be accompanied by or embody a notice stating the alternative sets of terms between which assenting shareholders are entitled to elect and specifying which of those sets of terms shall be applicable to the dissenting shareholder if he does not before the expiration of 14 days from the date of the giving of the notice notify to the transferee company in writing his election as between such alternative sets of terms, and the terms upon which the transferee company shall under this section be entitled and bound to acquire the beneficial ownership of the shares of the dissenting shareholder shall be the set of terms which the dissenting shareholder shall so notify or, in default of such notification, the set of terms so specified as applicable.

(11) In the application of this section to a transferor company the share capital of which consists of two or more classes of shares, references to the shares in the capital of the transferor company shall be construed as references to the shares in its capital of a particular class.

(12) Subject to subsection (13), this section shall not apply to a scheme, contract or offer the terms of which were published generally to the holders of the shares affected before the operative date and section 8 of the Companies Act, 1959, shall continue to apply to any such scheme, contract or offer and for the purposes of any such scheme, contract or offer, the said section shall be deemed to remain in full force.

(13) Where any such scheme, contract or offer as is mentioned in subsection (1) was approved or accepted in the manner described in that subsection at any time before the passing of the Companies Act, 1959, the court may by order on an application made to it by the transferee company within 6 months after the operative date authorise notice to be given under this section within such time after the making of the order as the court shall direct, and this section shall apply accordingly, except that the terms on which the shares of the dissenting shareholder are to be acquired shall be such terms as the court may by the order direct, instead of the terms provided by the scheme, contract or offer.