Reduction of capital means reducing the issued, subscribed, or paid-up share capital of the company. Because this affects the security of creditors, it is strictly regulated under Section 66.
Procedure:
The company must be authorized by its Articles (AoA).
A Special Resolution must be passed by the shareholders.
An application must be made to the Tribunal (NCLT) for confirmation.
Ways to Reduce Capital:
Extinguishing or reducing the liability on any of its shares in respect of share capital not paid up.
Canceling any paid-up share capital which is lost or unrepresented by available assets.
Paying off any paid-up share capital which is in excess of the wants of the company.
Protection of Creditors: The Tribunal will only confirm the reduction if it is satisfied that every creditor's debt has been discharged, secured, or their consent has been obtained.
No comments:
Post a Comment