Sandeep Ahuja & Co.

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Tuesday, December 20, 2016

Procedure for reduction of Share Capital of Company

The Procedure of Reduction of Share Capital of the Company.

Under the provisions Section 66 of the Companies Act, 2013 a company limited by shares or limited by guarantee and having a share capital may by a special resolution, reduce the share capital subject  to confirmation by the Tribunal in any of the manner:
(a) By extinguishing or reducing the liability on any of its shares in respect of the share capital not paid-up
(b) By canceling any paid-up share capital which is lost or is unrepresented by available assets
(c) By paying off any paid-up share capital which is in excess of the wants of the company
Such reduction shall be made if the company is not in default in the repayment of any deposits accepted by it or the interest payable thereon.

Form of application or petition for reduction of share capital under Section 66
The company for reduction in capital can make an application in RSC-1  to the tribunal along with prescribed fee ( Rs.5000 ) and the following documents:
·         List of Creditor giving particulars with respect to name , address and amount outstanding duly certified by Managing Director or by two of the Directors as true & correct as on a date not earlier than 15 days prior to the date of application.
·         A certificate from the Auditor that list of creditor filed with application is correct as per the records of the company verified by him
·         A certificate from the Auditor and declaration from a Director that company is not in arrear of repaying deposits accepted or of interest thereon on the date of application;
·         A Certificate from the Auditor that the company for such reduction of  the share capital has made proper accounting treatment and that is in conformity of accounting standard specified in Section 133
·         The copies of list of creditor must be kept at registered office for inspection by any person.

Issue of Notice and Directions by NCLT

Ø  The Tribunal within 15 days from the date of application give notice or direct to give notice to:
·         the Central Government, Registrar of Companies in form RSC-2;
·         the Securities and Exchange Board of India ( for listed companies), in form RSC-2
·         the Creditors of the company, in form RSC-3
(The Creditors within 7 days or within such period as may be decided by the tribunal)

Ø  The Tribunal shall give directions for publication of notice in Form RSC-4, for seeking objection within 7 days in English and Vernacular Language Newspaper with circulation in the State of Registered Office ad Tribunal may direct to upload such notice on the website of the Company.
Ø  The Notice must state the amount of proposed reduction of Share Capital, place where the list of creditor be inspected and time within which objection to be given. The Tribunal can fix the time maximum 3 months for filing of such objection from the date of publication.
Ø  The company or person so directed within 7 days from the date of issue of issue of notice give an affidavit in form RSC- 5 confirming to the tribunal dispatch & publication of notice.
The Representation by Central Government, Registrar Etc

The representation or objection by any authorities or creditors of the company can be made within 3 months from date of receipt of such notice in case no such representation is received within such period by the Tribunal then it will be presumed that they have no objection to such reduction.

Procedure if any representation and objection received
 The Company shall within 7 days of the expiry of the period up to which representations or objections were sought file its responses for such objections to the tribunal.

The tribunal has full discretion to make such order as it think fit for holding an enquiry or for re hearing. At the time of hearing if the tribunal is of view that the debt or claim of every creditor has been discharged or secured or his consent is obtained, the Tribunal is satisfied
Ø  The Tribunal may issue an order confirming the reduction of share capital and approving the minute may include any terms and conditions as may deem fit  in form RSC-6.
Ø  The Registrar may shall issue Certificate in form RSC-7 under Sec 66 (5).

The provisions of Section 66 shall not be applicable to Buy-back of securities.
Important forms for Reduction of Share Capital





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