TagSqueeze Out

Takeover of Unlisted Companies: A New Route

Squeeze out of minority shareholders of companies has been a controversial area. As a co-author and I had discussed, there are a number of methods by which squeeze outs can be effected in Indian companies. By way of a recent set of notification and rule-making efforts, the Ministry of Corporate Affairs (MCA) has just added another method that would be applicable to unlisted companies. Among the...

Squeeze Outs: Analyzing the Cadbury Decision

[Professor Vikramaditya Khanna and I have co-authored the following post] Background In India, several transaction structures are available for controlling shareholders to squeeze out minority shareholders. These include the compulsory acquisition mechanism, scheme of arrangement and reduction of capital. Out of these, the most commonly used method is the reduction of capital. That is not at all...

Delaware Standard for Controlled Company Mergers

Delaware courts have long been considering disputes pertaining to mergers between companies and their controlling shareholders. Not only do such mergers involve related party transactions but they are also used as a means to squeeze out the minority shareholders of the target who are cashed out as part of the merger. In one of the first decisions that permitted minority shareholders to bring...

Andhra Pradesh High Court on Reduction of Capital: More Uncertainty?

In an earlier post, I had highlighted some observations of the Bombay High Court in Re Organon, and had commented on whether the decision of the Single Judge in that case stood easily along with the observations of a Division Bench in Sandvik. The decision in Sandvik can perhaps be read to mean that when an overwhelming majority of non-promoter shareholders votes in favour of the scheme, then the...

Section 100 revisited: In Re Organon

We have discussed the law on reduction of share capital under Section 100 of the Companies Act previously. A recent decision of a Single Judge of the Bombay High Court has an interesting observation in this regard. In Re Organon (India) Limited [2010] 101 SCL 270 (Bom), Kathawalla J. observes after discussing the previous cases (including British & American Trustees [1894] AC 399, Re Panruti...

Squeezing Out Minority Shareholders: A Recent Judgment

The question of squeezing out minority shareholders (also known as freezeouts in some jurisdictions) is always a vexed question. This is because the law in certain circumstances allows minority shareholders to be forcibly bought out by the majority shareholders or the company such that they are forced out of the company. The controversy arises because this might amount to a deprivation of...

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