Reducing Of Share Capital

Section 66 of the companies act, 2013 lays down the procedure for reducing the share capital of a company. Share capital refers to the total amount of money that a company raises by issuing shares to its shareholders. Share capital is an important aspect of a company's financial structure and can be reduced for a variety of reasons, such as to write off losses or to return excess capital to shareholders.

Under Section 66, a company can reduce its hare capital by passing a special resolution in a general meeting, with the approval of the National Company Law Tribunal (NCLT). The resolution must state the reasons for the reduction, the amount of the reduction, and how it will be carried out. The company must then file the resolution and other documents with the Registrar of Companies (ROC), who will review the documents and provide its approval.

Once the approval is obtained from the ROC, the company must publish a notice of the reduction in a national newspaper, inviting objections from creditors and shareholders. If no objections are received within the specified period, the company can proceed with the reduction of share capital. There are some important things that a shareholder should keep in mind shareholders and creditors have the right to object to a reduction of share capital, and it's important for companies to address any objections in a timely and transparent manner. Failure to do so can result in legal action and financial liabilities.

It is important for the companies to comply with section 66 requirements as failure to do so can result in legal and financial consequences. If a company fails to follow the prescribed procedure, any reduction in share capital will not be valid, and the company may be liable for any losses or damages suffered by its shareholders or creditors as a result of the non-compliance. The company may also face legal action by its shareholders or creditors and may be subject to penalties and fines imposed by the NCLT for non-compliance.

There are some new amendments like the MCA i.e., ministry of corporate affairs made some changes to the rules for reducing the share capital of a company in 2018. Companies now need to fill out a new form called the PAS3 and submit it along with other documents when they want to reduce their share capital. In addition to this, they also need to submit the order pass ed by the National Company Law Tribunal (NCLT) approving the reduction of share capital. The se changes were made to make the process of reducing share capital clearer and more straightfor ward.