Rights of minority in takeover/privatisation arrangements

What can a minority shareholder do if shares in the company are targeted to be transferred to another entity ("NewCo"), especially if the minority thinks that the valuation offered is less than fair? Here is a summary of section 180 of the Companies Act:

1. The NewCo can within 4 months of receipt of 90% shareholder support give notice that it intends to compulsorily acquire the shares of the remaining 10% on the same terms as that accepted by the 90% (section 180(1)).

2. Upon receipt of notice mentioned in para 1 above, dissenting minority shareholders may within 1 month issue a notice to NewCo seeking names and addresses of all other dissenting shareholders (section 180(2)).

3. Within 1 month from date of notice in para 1 or 7 days from date details are furnished pursuant to para 2 above, dissenting minority shareholders may apply to Court to challenge the NewCo's right to compulsorily acquire their shares. Usually, the challenge goes towards the valuation of the shares, as opposed to qualitative objections.

4. Alternatively, if NewCo does not indicate its intention to compulsorily acquire the shares of the dissenting shareholders, the dissenting shareholder himself can give notice within 3 months of transfer of the 90% shares to the NewCo to compel the NewCo to acquire their shares either (a) on the same terms as the 90% shareholders; or (b) on any other agreed terms; or (c) on terms as the Court deems fit. Again, this implies that the Court will resolve valuation issues in such a scenario.

In view of the aforesaid, minority shareholders who receive a less-than-palatable offer need not be concerned that they would eventually be stuck as minority shareholders in a new entity where the value of their shares cannot be unlocked.