- This topic has 3 replies, 2 voices, and was last updated 4 years ago by
.
- Posts
dear john sir,
Sir i have a doubt specifically relating to the mandatory bid rule definition mentioned below:
“Both the mandatory bid rule is designed to protect minority shareholders, where an acquirer has obtained a controlling interest of the target company. The mandatory bid rule provides minority shareholders with the opportunity to sell their shares and exit the target company at a specified fair share price. This price should not be lower than the highest price paid for shares,which have already been acquired within a specified period.”
Here sir it is cited that the remaining shareholders of the target will get a price that is not lower than the highest price paid by the acquirer to obtain controlling interest of the target.
however, am quite skeptical of it. The majority shareholders get a higher price, because they deserve it. And they deserve it because, their stake contains voting rights which can sway the decision of the company in their favour. so their stake cannot and should not be sold out for the same price as that of minority. i don’t think its kosher.
Perhaps am missing out on something. would you mind shedding some light on this?
Why do you say that the majority shareholders deserve it? Why should some receive a higher price per share just because they own more shares? It is to stop the oppression of minorities and is the law.
sir but doesn’t mandatory bid rule, contravene squeezee-out rights? Where if the party having the controlling interest of the company may force the minority shareholders to sell their shares at discounted rates?.
But that would not be fair. Suppose I think a company is worth $20M and I want to buy it. If 60% of the shares were owned by 1 shareholder, then if it was not for the rule what would stop me simply offering all the money to the majority and offering nothing at all to the minority shareholders? If that was allowed then I could probably get the company by paying a lot less than $20M 🙂
- You must be logged in to reply to this topic.