Procedure For Reduction Of Share Capital Under Section 66 Read With NCLT (Procedure For Reduction Of Share Capital) Rules, 2016

i. Convene a Board Meeting to approve the reduction of share capital and fixing the date of general meeting of the company.

ii. Hold the general meeting and have the Special Resolution passed.

iii. File MGT-14 with ROC within 30 days of passing of Special Resolution.

iv. Apply to NCLT by filing an application in Form RSC-1 along with prescribed fee of Rs. 5,000/- to confirm reduction.

v. The application shall be accompanied with:

1. List of creditors duly certified by the Managing Director, or in his absence, by two directors, as true and correct, which is made as on a date not earlier than fifteen days prior to the date of filing of an application showing the details of the creditors of the company, class-wise, indicating their names, addresses and amounts owed to them;

2. A Certificate from the Auditor of the Company to the effect that the list of creditors as mentioned above is Correct as per the records of the Company verified by the auditor.

3. A certificate by the auditor and declaration by a director of the company that the company is not, as on the date of filing of the application, in arrears in the repayment of the deposits or the interest thereon; and Accounting Treatment proposed by the company for reduction of share capital is in conformity with the Accounting standards.

4. A certificate by the company’s auditor to the effect that the accounting treatment proposed by the company for the reduction of share capital is in conformity with the accounting standards specified in section 133 or any other provisions of Act.

vi. The NCLT shall within 15 days of submission of the application give a notice to ROC and SEBI in Form RSC-2 and to every creditors of the company in Form RSC-3.

vii. The notice shall be sent to all the creditors within 7 days of the directions given by the NCLT. The NCLT shall also give directions for the notice to be published in Form RSC-4 within seven days of such direction in a leading English and vernacular language newspaper and for uploading on the website of the company.

viii. The company shall file an affidavit in Form RSC-5 confirming the dispatch and publication of the notice within seven days from the date of issue of such notice.

ix. The NCLT may dispense with the requirement of giving notice to the creditors or publication of notice, if every creditor has been discharged or secured or given his consent.

x. Representation by ROC, SEBI and creditors shall be sent to NCLT within 3 months of receipt of notice and copy of which shall also be sent to the company. If no such representation has been received by NCLT within the said period, it shall be presumed that they have no objection.

xi. Company shall send the representation or objections so received along with responses of the company thereto within 7 days of expiry of period upto which objections were sought.

xii. NCLT may hold any enquiry on adjudication of claim and/or give direction for securing the debts of the creditors.

xiii. The order confirming the reduction of share capital shall be in Form RSC-6.

xiv. The company shall deliver a certified copy of the order of the NCLT under sub-section (3) and of minute approved by the Tribunal to the ROC and file E-form INC-28. within 30 days of the receipt of order.

xv. The ROC shall issue a certificate to that effect in Form RSC-7.

Timeline for Reduction in Share Capital

Section 66 of the Companies Act and NCLT ( Procedure for reduction of share capital of Company) Rules, 2016

Time Period Particulars Remarks, if any
Board meeting Board meeting shall be convened for 1. considering reduction 2. calling EGM 3. Giving Authorization for appearance Authority in Articles of Association to be checked
EGM EGM shall be conducted to pass Special Resolution for reduction of share Capital Form MGT -14 shall be filed within 30 days of passing special resolution
Application Form No. RSC-1
Attachments 1. The list of creditors Affidavit verifying application in Form NCLT 6
  2. Auditor’s Certificate for the List of creditors
  3. Auditors’ Certificate for no default in repayment in deposits
  4. Declaration from the director for no default in repayment in deposits
  5. Auditors’ Certificate regarding accounting treatment for reduction as per Section 133 of the Company’s
Issue of Notice or Directions to issue notice by NCLT Within 15 days of submission of application NCLT shall give notice, or direct that notice be given to – (i) the Central Government, Registrar of Companies, in all cases, in Form No. RSC-2; (ii) the Securities and Exchange Board of India. in the case of listed companies in Form No. RSC-2: (iii) the creditors of the company, in all cases in Form No. RSC-3;seeking their representations and objections, if any.
Notice to creditor within 7 days of the direction given as above Notice shall be given to each creditor whose name is entered in the list of creditors submitted by the company. Must contain: 1. Amount of proposed reduction 2. Amount of the debt to be mentioned
Notice in newspaper within 7 days from the date on which the directions are given Notice to be published in Form RSC-4 in English language in a leading English newspaper and in a leading vernacular language newspaper and to be uploaded on the website of the Company, if any. Must contain: 1. Date of hearing, 2. Amount of proposed reduction , 3. Place where list of creditors to be inspected , 4. Time whitin which objections may be sent by creditors
Objections to be filed within 3 months from the date of publication of the notice Shall be filed in the Tribunal A copy served tyo be served to the Company
Affidavit confirming dispatch and publish of notice  not later than 7 days from the date of issue of such notices Form No. RSC-5 To be filed by the Company or person who was directed to issue notice and publication
submission of representations and objections by the Company within 7 days from the expiry of 3 months Company shall file with the tribunal alongwith responses to the same

Memorandum of appearance shall be filed in Form NCLT 12 and a Board resolution for authorizatin regarding the same shall be attached.

Author of this article is CS YOGESH GUPTA & can be reached at [email protected] & 7742681270

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CS YOGESH GUPTA is founder of Yogesh Gupta & Associates, Company Secretaries & Co- founder of IURIS Consultants LLP & E & A Consultants LLP and Corporate & IPR Law Professionals. He is a Commerce Graduate and an Associate Member of the Institute of Company Secretaries of India ( View Full Profile

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May 2021