The provisions of sections 100 to 105 have to be complied with if a company reduces its Share Capital. As discussed above, under alteration of Share Capital, if a company diminishes its Share Capital by cancelling its unissued shares, the confirmation by the Court is not necessary for such a step, though it is also a way in which Share Capital may be reduced.
Under section 100, a company limited by shares or a company limited by guarantee and having a Share Capital may reduce its Share Capital if:
(i) It is authorized by the Articles,
ADVERTISEMENTS:
(ii) A special resolution has been passed for the purpose and
(iii) The confirmation of the Court is obtained.
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To reduce the Share Capital, the company may:
ADVERTISEMENTS:
(a) extinguish or reduce the liability or any of its shares, in respect of Share Capital not paid, e.g., Rs. 6 unpaid on a ten-rupee share may be totally extinguished or reduced to Rs. 2;
(b) Either with or without extinguishing or reducing liability on any of the shares as aforesaid;
(i) cancel any paid-up share capital which is lost, or is unrepresented by available assets (e.g., huge debit balance of Profit and Loss Account may be wiped off by reducing nominal and paid-up value of shares from Rs. 10 to Rs. 15);
(ii) pay off any Paid-up Share Capital which is in excess of the wants of the company (e.g., out of the total Share Capital of Rs. 250000, Rs. 50000 being in excess of want of the company may be returned to Shareholders); and may, if and so far as is necessary, alter its Memorandum by reducing the amount of its Share Capital and of its shares accordingly.
ADVERTISEMENTS:
The Court may make an order directing that the company shall during a specified period add to its name as the last words ‘and reduced’ which shall be deemed to be part of the name of the company for such period.
The Registrar, on delivery to him of a certified copy of the Court’s order and of a Minute approved by the Court, is required to register and certify the registration thereof.
His certificate shall be conclusive evidence that all the requirements of the Act with respect to the reduction of Share Capital have been complied with, and that the Share Capital of the company is such as is stated in the Minutes.