What is the procedure for reduction of share capital?

A company limited by shares or limited by guarantee and having a share capital may, reduce the share capital by passing a special resolution, subject to the confirmation by the Tribunal (NCLT) and alter its memorandum by reducing the amount of its share capital and of its shares accordingly.

What are the procedures for such reduction?

The Following procedure is to be followed for Reduction of Share Capital of a Company

  1. Convene a Meeting of Board of Directors. …
  2. Making the disclosure of the Board meeting [Regulation 30 and 46(3) of the SEBI (LODR) Regulations, 2015] …
  3. Convene General Meeting. …
  4. Filing of forms with ROC [Section 117]

What does reduction in share capital means?

The Reduction of Share Capital means reduction of issued, subscribed and paid up share capital of the company. Previously, reduction of share capital was governed by section 100 to 104 of the Companies Act, 1956, now it is governed by section 66 of the Companies Act, 2013.

Who approved the scheme of capital reduction?

14.3. The Scheme being approved by the creditors of the Company, as prescribed under the Act and / or as may be directed by the NCLT and / or any other Appropriate Authority as may be applicable.

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What is Section 77 of companies Act 2013?

Section 77 – It is the duty of every corporation creating charge in any such form, on payment of such fees and in such manner as might be prescribed, with the Registrar within 30 days of its creation.

What is share capital discuss the procedure of alteration and reduction of share capital?

Alteration of Share Capital vs. Reduction of Share Capital under Companies Act, 2013

Alteration of Share Capital Reduction of Share Capital
Here, the interest of creditors not affected Yes-Affected, that’s why their consent and No-Objection is required from them

How shareholders can reduce share capital of a company?

A company may generally reduce its share capital in any way. In particular, a company may do so by cancelling or reducing the liability on partly paid shares, repaying any paid-up share capital in excess of the company’s wants, or cancelling any paid-up share capital that is lost or unrepresented by available assets.

How is capital reduction account prepared?

The Capital Reduction Account is started by the companies for the process of internal modifications. The account is made by reducing share value of the stakeholders, through various forms of purchases of shares and more. Once the process is completed the account is not operational any more.

Why capital reduction is done?

Capital reduction is the process of decreasing a company’s shareholder equity through share cancellations and share repurchases, also known as share buybacks. The reduction of capital is done by companies for numerous reasons, including increasing shareholder value and producing a more efficient capital structure.

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Why reduction of share capital is done?

A company may want to reduce its share capital for various reasons, including to create distributable reserves to pay a dividend or to buy back or redeem its own shares; to reduce or eliminate accumulated realised losses in order to be able to make distributions in the future; to return surplus capital to shareholders; …

How do you deal with the balance in capital reduction account?

At the same time it must be remembered that appreciation of the assets, if any, must be passed through this account (i.e. Re-organisation/Reconstruction Account), that is, this account should be credited. The balance if any, should be transferred to Capital Reserve Account.

When can a company cancel subscribed shares?

According to clause (e) of Sub-section (1) of Section 61 of the Companies Act, 2013, a limited company having a share capital may, if so authorised by its articles, cancel its shares which, at the date of the passing of the resolution in that behalf, have not been taken or agreed to be taken by any person, and diminish …

Is capital reduction taxable?

The income received on capital reduction would be taxable as under: … Distribution over and above the accumulated profits, in excess of original cost of acquisition of shares would be chargeable to capital gains tax in the hands of the share holders.