tag:blogger.com,1999:blog-3202774368551476669.post6934830117561719317..comments2023-09-15T16:21:31.980+05:30Comments on INDIAN CORPORATE LAW: Squeezing Out Minority Shareholders: A Recent JudgmentUmakanth Varottilhttp://www.blogger.com/profile/12438677982004444359noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-3202774368551476669.post-11568124363909862992009-05-11T15:44:00.000+05:302009-05-11T15:44:00.000+05:30I think there are some facts which are observed fr...I think there are some facts which are observed from the Sandvik case : <br />It concerned only a S.100 reduction without S. 391 scheme (as evident from the DB judgment; I don't think the Single Judge has not made n observation on this). The single judge had called a class meeting purely under a S.100 scheme. <br />Also, one of the reasons the Court cited while appoving the scheme was also because it said that an overwhelming majority of the minority approved the reduction- (the minority in consideration comprised the 5 % non-promoter group) and over 99 % of the total votes polled were in favour of the buyback.<br />Further, I wanted to bring to light the Bom HC (Single Judge) case of In Re Hoganas India Ltd. (2009) 88 CLA 174 (Bom.) delivered on 21st August 2008 which was passed before Sandvik (DB), at the time when the Single Judge's Judgment carried the day. The reduction plan there had one difference that S. 391 was involved there, unlike Sandvik. Nevertheless, the Court refused to call a separate meeting of the promoter's subsidiary in that case. <br />Briefly, facts were that there was company Hoganas India Ltd. which was delisted from the stock exchange. A scheme to buy all its shares except promoter shares of 96.15% held by Hoganas AB Sweden (its holding company) was proposed. An additional 1.82 % of the shares were held by the subsidiary of Hoganas AB Sweden, and remaining 2.01 % by other shareholders. A meeting for approval was called of the Hoganas' subsidiary only and the other shareholders (not Hoganas AB Sweden) .<br />It was interesting to see how the Court distinguished Hoganas from Sandvik (Single Judge), without going into the difference between S.391 + S.100 scheme versus an only S.100 proposal. The question requiring determination was what constitutes a class, and from that it would be determinable whether a class meeting was required. The Court held, following established precedents such as Miheer Mafatlal's case (SC) that a class would not merely be a separately identifiable group (promoter versus non-promoter, etc.) but would be a group to whom different terms were being offered under the scheme. Now, It held that in this case the shareholders had commonality of interest, with identical terms being offered to them (because even the shares of the subsidiary of Hoganas amounting to 1.82 % were being bought; those of the holding amounting to 96 % were safe, and the holding company was not called for that reason). <br /><br />Abhyudaya Agarwal<br />3rd Year,<br />NUJS, KolkataAbhyudaya Agarwalhttps://www.blogger.com/profile/16572318376320135553noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-49230218903867900202009-05-06T15:03:00.000+05:302009-05-06T15:03:00.000+05:30Adit, thanks for your comment. Yes, there is a typ...Adit, thanks for your comment. Yes, there is a typographical error. It should read "reduction of capital whereby the company would reduce the share capital of all shareholders other than the promoters/ controlling shareholders". It has been corrected in the post.Umakanth Varottilhttps://www.blogger.com/profile/12438677982004444359noreply@blogger.comtag:blogger.com,1999:blog-3202774368551476669.post-68710110502253365202009-05-06T14:58:00.000+05:302009-05-06T14:58:00.000+05:30"In the next couple of years, several High Courts ..."In the next couple of years, several High Courts (Karnataka and Andhra Pradesh, just to name two) had approved schemes of arrangement involving reduction of capital whereby the company would reduce the share capital of all shareholders other than the minority shareholders. This is tantamount to a squeeze out." <br /><br />Kindly explain how the same amounts to a squeeze out. Is there some mistake - 'the company would reduce the share capital of all shareholders other than the minority shareholders'. Shouldn't this be promoter shareholders?<br />Thank you.Adit C.noreply@blogger.com