Company Share Capital Reduction Procedure Explained

1. Section 66 of 2013 Reduction of share capital

2. Applicability to Company - • Limited by shares • Limited by guarantee and having share capital Non – Applicability • Buy-back of its own securities by a company under section 68 of 2013

3. Prerequisite Condition • Special Resolution • Confirmation by Tribunal

4. Method / Type of Reduction • a) Extinguish/Reduce Liability on any unpaid shares or

5. Method / Type of Reduction ……… • B) Either with or without extinguishing or reducing liability on any of its shares,— a) cancel any paid-up share capital which is lost/is unrepresented by available assets; or b) pay off any paid-up share capital which is in excess of wants of the company

6. Reduction not allowed • If company is in arrears in repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon.

7. File with Tribunal • A certificate from company’s auditor stating the accounting treatment, proposed by the company for such reduction is in conformity with the accounting standards.

8. Procedure at Tribunal • Tribunal Shall:- - Give notice of every application to CG, ROC and SEBI and the creditor’s . - Take into consideration the representations, if any, made to it within 3 months from date of receipt of the notice.

9. Procedure at Tribunal …… • If no representation received - presumed that they have no objection. • If Tribunal satisfied - debt or claim of every creditor has been discharged/determined/ secured/his consent is obtained – Tribunal can make order.

10. Procedure at Tribunal …… • No application sanctioned unless accounting treatment, proposed by company for such reduction is in conformity with the AS or any other provision of this Act.

11. After confirmation by Tribunal • Publish order of confirmation in such manner as the Tribunal may direct. • Submit certified copy of order and a minute approved by the Tribunal to the ROC within 30 days. • ROC shall register the same and issue a certificate to that effect.

12. Forms to be filed with ROC • E-Form No. MGT-14 :- Filing of Special Resolutions, within 30 days • E-Form No. INC-28 :- Notice of Order of the Court or any other competent authority, within 30 days • E-Form No. MGT-14 :- Special Resolution for amend MOA and AOA, within 30 days

13. Penalty • If any officer of the company - Knowingly conceals the name of any creditor entitled to object to the reduction or • misrepresents the nature or amount of the debt or claim

14. Penalty….. • Shall be punishable with imprisonment 6 months to 10 yrs. • Fine not less than amount involved in the fraud, but may extend to 3times the amount involved

15. Penalty….. • If a company fails to publish order of confirmation of the reduction • shall be punishable with fine not less than Rs.5 Lac but may extend to Rs.25 Lac.

16. PROCEDURE TO BE FOLLOWED • Hold BM – consider and approve proposal of reduction of share. • Hold AGM or EGM to consider and approve proposal of reduction of share capital. • File E-Form No. MGT-14 with ROC within 30 days • Discharge or determine - debt or claim of every creditor or said has been secured or obtain consent from every creditors.

17. PROCEDURE TO BE FOLLOWED ……. • Obtain a certificate from auditor stating accounting treatment, proposed by company for reduction is in conformity with AS and files same with Tribunal. • Hold BM - Adopt order of confirmation of reduction and authorize director to publish order as directed by Tribunal and to submit the same with ROC.

18. PROCEDURE TO BE FOLLOWED ……. • Publish order of confirmation of the reduction in such manner as the Tribunal may direct. • File E-Form No.INC-28 within 30 days • Hold EGM to giving effect to Alteration of MOA / AOA. • File E-Form No. MGT-14 with ROC within 30 days