Steps involved for reduction of Share Capital for unlisted Indian Companies
A company limited by shares or limited by guarantee and having a share capital, desirous of reducing its capital may do so in the following manner:
STEP 1:
- Articles of Association of the Company must authorize such reduction. If not, then first the Article of Association of the Company needs to be amended.
STEP 2:
- Holding of Board Meeting to:
a) Approve the scheme of reduction of share capital by a resolution;
b) Fix time, date and venue for holding a general meeting of the company for passing a special resolution for reduction of share capital;
c) Approve notice, agenda and explanatory statement to be annexed to the notice of the general meeting as per Section 102 of the Act;
d) Authorize the company secretary or some other competent officer to issue notice of the general meeting as approved by the Board.
STEP 3:
- Holding of General Meeting to:
a) Approve the reduction of capital by way of passing Special Resolution.
STEP 4: Form filing with ROC
- File MGT-14 along with a certified true copy of the special resolution(s), copy of explanatory statement under Section 102 and copy of altered Memorandum of Association and Articles of Association with the ROC within thirty days of the passing of the resolutions along with the prescribed filing fee for its registration under Section 117 of the Act.
STEP 5: Getting approval of NCLT
I. Apply to National Company Law Tribunal for confirmation of the capital reduction by in Form No.RSC-1 along with a fee of Rs. 5,000/- accompanied with following documents:
a) the 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;
b) a certificate from the auditor of the company to the effect that the list of creditors referred to in clause (a) is correct as per the records of the company verified by the auditor;
c) 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
d) 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.
II. Copies of the list of creditors shall be kept at the registered office of the company and any person desirous of inspecting the same may, at any time during the ordinary hours of business, inspect and take extracts from the same on payment of the sum of rupees fifty for inspection and for taking extracts on payment of the sum of rupees ten per page to the company.
III. Notice to be given to creditors in Form RSC-3, if ordered by the Tribunal.
IV. To publish notice in newspaper in form RSC-4 within seven days from the date on which the directions are given by Tribunal, in English language in a leading English newspaper and in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated, or such newspapers as may be directed by the Tribunal and for uploading on the website of the company (if any) seeking objections from the creditors and intimating about the date or hearing.
V. Company to file an affidavit in Form RSC-5confirming the despatch and publication of the notice within 7 days from the date of issue of such notice.
VI. The order confirming the reduction of share capital and approving the minute shall be in Form No. RSC-6on such terms and conditions as may be deemed fit.
STEP 6: Form filing with ROC
I. Order copy of NCLT to be filed in e-form INC 28 with ROC within 30 days of receipt of order.
II. The Certificate issued by the Registrar under sub-section (5) of section 66 of the Companies Act, 2013 shall be in Form No. RSC-7.
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