Reduction of Share Capital under Companies Act
In this article, it is discussed about “Reduction of Share Capital” and its procedure under section 66 of the Companies Act, 2013 in line with NCLT Rules, 2016 and recent case law. On 07th December, 2016, Ministry of Corporate Affairs (MCA) has vide its Commencement Notification notified various sections of Companies
Reduction of share capital is regarded as one of the process of decreasing company’s share capital (apart from Redemption of preference shares and Buy Back of shares which are governed by other provisions separately). The Reduction of Share Capital means reduction of issued, subscribed and paid up share capital of the company. In simple words it can be regarded as ‘Cancellation of Uncalled Capital’ i.e. part of subscribed share capital.
The need of reduction share capital may arise in various situations, few are listed below:
Previously, reduction of share capital was governed by section 100 to 104 of the Companies Act, 1956. As per the old act, it was subjected to the confirmation of court, under new Act 2013, the said powers of court has been transferred to Tribunal (NCLT).
he need of reducing share capital may arise in various situations, few are listed below:
- Returning of surplus to shareholders;
- Eliminating losses, which may be preventing the payment of dividends;
- May be as part of scheme of compromise or arrangements;
- To simply capital structure;
Previously, reduction of share capital was governed by section 100 to 104 of the Companies Act, 1956. As per the old act, it was subjected to the confirmation of court, under new Act 2013, the said powers of court has been transferred to Tribunal (NCLT).
