Reduction of Share Capital under Section 66 of Companies Act, 2013
1. Way of Reduction of Share Capital Section 66(1)
1. Extinguishment or reduce the liability on any shares in respect of share capital not paid up;
2. either with or without extinguishment or reducing liability on any shares-
i. Cancel any paid-up share Capital which is lost or is unrepresented by available asset; or
ii. Pay off any paid-up share capital and of its shares accordingly.
2. Board Resolution
1. To approve the notice for calling the General meeting for the purpose of the reduction of share capital;
2. To fix the Time, Date, Place of General Meeting.
3. To make application to NCLT to Reduction of share Capital.
3. General Meeting Section 66(1)
Passing of the following special resolutions-
a. To reduce the share capital of the Company;
b. To alter the MOA the Company
4. Application to NCLT Section 66(1)
An application shall be made to the NCLT for approval of the reduction of share capital.
5. Notice to the Govt, authorities and creditors Section 66(2)
On receipt of application the NCLT shall give notice of application to the CG, Registrar, SEBI(in case of listed company) and creditors of the company and shall take in to consideration the representation, if any made to the NCLT by CG, ROC, or SEBI, or Creditors of the Company within a period of 3 Months from the date of receipt of notice.
6. NCLT consider the relevant factors Section 66(3)
NCLT may, if it is satisfied that the debt or claim of every creditors of the company has been discharged or determined or has been secured or his consent is obtained, make an order confirming the reduction of share capital on such terms and conditions as may be prescribed.
7. Compliance of AS Proviso to Section 66(3)
Unless the accounting treatment, proposed by the company for such reduction is in conformity with AS specified in section 133 and a certificate to that effect by the Company’s Auditor has been filed with the Tribunal, no application for reduction of share capital shall be sanctioned by the company
8. Publication of order of the NCLT Section 66(4)
The order for approval of Reduction of share capital shall be published by the company.
9. Order to be filed with the ROC Section 66(5)
A CTC of the Order of the NCLT along with the minutes of general meeting mentioning the following-
A. Share capital amount;
B. No. of shares into which it is to be divided;
C. Amount of each shares;
D. The amount, if any, at the time of registration deemed to be paid-up on each share, Shall be filed with the ROC (Form SH-7, as the case may be INC-28) within 30 days and registrar register the same and issue a Certificate for the same.
10. Liability of Members Section 66(7)
Past or present, any member of the Company, shall not be liable to any call or contribution in respect of any shares held by him exceeding the amount of difference, if any between the amount paid on the shares, or reduced amount, if any, as the case may be, and the amount of the share as fixed by the order of reduction.
11. Rights of aggrieved creditors Section 66(8)
Where the name of any creditor who have to object the reduction of share capital, is by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after such reduction, the company commits a default, within the meaning of section 6 of the Insolvency and Bankruptcy Code, 2016, in respect of the amount of his debt or claim.
1. every person, who was a member of the company on the date of the registration of the order of NCLT for reduction by the Registrar, shall be liable to contribute to the payment of that debt or claim, an amount not exceeding the amount which he would have been liable to contribute if the company had commenced winding up on the day immediately before the said date; and
2. if the company is wound up, the NCLT may, on the application of any such creditor and proof of his ignorance as aforesaid, if it thinks fit, settle a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.
13. Liability U/s 447 in case of officer in default
If any officer of the company shall be liable us 447 in following cases—
(a) willfully or Knowingly conceals the name of any creditor entitled to object to the reduction;
(b) willfully or Knowingly misrepresents the nature or amount of the debt or claim of any creditor; or
(c) abets or is privy to any such concealment or misrepresentation as aforesaid,
14. Fine for defaulting Company
If the company contravene the any provisions of the Law-
Minimum fine; Rs. 5,00,000
Maximum fine; Rs. 25,00,000