Chapter XV - Compromises, Arrangements and Amalgamations
Section 238
Section 238: registration of offer of schemes involving transfer of shares
Section 238 regulates the circulars used for share-acquisition offers under section 235. Each circular must carry prescribed information and a statement on how cash will be available, and must be registered by the Registrar before it is issued.
On this page
Need advice on Section 238?
This article is for general information. Refer to the Companies Act, 2013 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) In relation to every offer of a scheme or contract involving the transfer of shares or any class of shares in the transferor company to the transferee company under section 235,—(a) every circular containing such offer and recommendation to the members of the transferor company by its directors to accept such offer shall be accompanied by such information and in such manner as may be prescribed; (b) every such offer shall contain a statement by or on behalf of the transferee company, disclosing the steps it has taken to ensure that necessary cash will be available; and (c) every such circular shall be presented to the Registrar for registration and no such circular shall be issued until it is so registered: Provided that the Registrar may refuse, for reasons to be recorded in writing, to register any such circular which does not contain the information required to be given under clause (a) or which sets out such information in a manner likely to give a false impression, and communicate such refusal to the parties within thirty days of the application. (2) An appeal shall lie to the Tribunal against an order of the Registrar refusing to register any circular under sub-section (1). (3) The director who issues a circular which has not been presented for registration and registered under clause (c) of sub-section (1), shall be liable to a penalty of one lakh rupees.
Introduction
Section 238 commenced on 15 December 2016 under S.O. 3677(E). The Companies (Amendment) Act, 2019, s. 32 (deemed in force from 2 November 2018) replaced the fine in sub-section (3) with a penalty of one lakh rupees on the director.
Key takeaways
Prescribed information
A circular containing the offer and the directors’ recommendation must carry the prescribed information in the prescribed manner.
Cash statement
The offer must state the steps the transferee company has taken to ensure necessary cash will be available.
Registration before issue
The circular must be presented to the Registrar and cannot be issued until registered.
Penalty
A director who issues an unregistered circular is liable to a penalty of one lakh rupees.
Contents and registration
Under sub-section (1), for every offer of a scheme or contract for transfer of shares in the transferor company to the transferee company under section 235: (a) every circular containing the offer and the directors’ recommendation to accept must be accompanied by prescribed information in the prescribed manner; (b) every offer must contain a statement by or for the transferee company disclosing the steps taken to ensure necessary cash will be available; and (c) every circular must be presented to the Registrar for registration and not issued until registered.
Under the proviso, the Registrar may refuse, with reasons recorded in writing, to register a circular that lacks the information required by clause (a) or presents it in a way likely to give a false impression, and must communicate the refusal within thirty days of the application.
Appeal and penalty
Under sub-section (2), an appeal lies to the Tribunal against the Registrar’s order refusing registration. Under sub-section (3), as substituted in 2019, a director who issues a circular that has not been presented for registration and registered under clause (c) is liable to a penalty of one lakh rupees.
Practical preparation
Prepare the circular with the prescribed information; include the cash-availability statement; file it with the Registrar and wait for registration before issuing; diarise thirty days from the application for any refusal; and consider an appeal to the Tribunal if registration is refused.
Procedure, forms, fees and timelines for applications under this provision are set out in rules made under the Act and in the Tribunal’s procedure; check the current text of those rules, and any exemption notification for your class of company, before relying on this guide.
Practical checklist
Do
- Wait for the Registrar to register the circular before sending it to members.
- State clearly how the transferee company will fund the purchase.
Avoid
- Do not issue the circular while registration is pending.
Illustrative example
Hypothetical: refusal of registration
The Registrar refuses to register an offer circular because the cash-availability statement is vague.
Fix or appeal
The transferee company can revise and re-present the circular, or appeal the refusal to the Tribunal.
No issue meanwhile
The circular is not issued until registered, keeping directors clear of the penalty.
Outcome
- Registration before issue protects both the offer and the directors.
Glossary
- Offer circular
- The document sent to members of the transferor company containing the offer and the directors’ recommendation.
- Registrar
- The Registrar of Companies with whom the circular is registered.
Frequently asked questions
Can the Registrar refuse to register the circular?
Yes, with reasons recorded in writing, if it lacks the required information or presents it in a way likely to give a false impression. The refusal must be communicated within thirty days of the application.
What is the penalty for issuing an unregistered circular?
The director who issues it is liable to a penalty of one lakh rupees.
Need help applying this provision to your situation?
Contact BizeneedLast updated 12 October 2026