MCA declared Companies (Compromises, Arrangements and Amalgamations) Second Amendment Rules, 2020
The Companies (Compromises, Arrangements and Amalgamations) Second Amendment Rules, 2020 has been declared as a modification of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016; by the Ministry of Corporate Affairs (MCA).
This amendment is aimed at incorporating the phrase ‘corporate action,’ which signifies any action undertaken by a company that is pertaining to the transfer of shares as well as including all the other benefits accrued on the same such as bonus shares, split, consolidation, fraction shares and right issue to the acquirer.
MCA aims to insert Rule 26A which is regarding procurement of shares in the DEMAT account through minority shareholders. Under this new rule, the company should authenticate the details of minority shareholders holding shares in dematerialised form within two weeks from the time of the receipt of amount equal to the price of shares that are to be acquired by an acquirer, under section 236 of the Act.
Post authentication, the company is to inform all the minority shareholders about a certain cut-off date on which their shares shall be debited from their account and credited to the company’s designated DEMAT account. The cut-off date shouldn’t be earlier than one month from the date the notice was sent. The shares may also be credited in the account of the acquirer before the cut-off date, only if duly mentioned in the notice.
Once the required information is received, the depository shall transfer the shares, for those minority shareholders that haven’t transferred their shares themselves in favor of the acquirer, into the company’s designated DEMAT account on the agreeed cut-off date and inform the company about the same.
Once the company is informed by the depository about the successful transfer of shares, it shall then immediately disburse the price of the transferred shares to each of the minority shareholders post the deduction of the applicable stamp duty, which is to be paid by the company.
To ensure effective transfer of shares through corporate action, MCA states that the Board shall authorize the Company Secretary, or any other person in his absence, who is to notify the depository and submit the required documents under the sub-rule (4).