Reduction of Share Capital- Sec 66 of Companies Act, 2013

Section 66 of Companies Act, 2013 – Reduction of Share Capital

Approval of shareholders by way of Special Resolution.
Application or Petition by Company for Reduction of Share Capital in form RSC-1 with fees of Rs. 5000/-

Documents required with petition

List of creditors certified by MD or 2 directors not earlier than 15 days prior to the date of filing.
A certificate from auditor of the Company to the effect that list of creditors is correct as per records.
A certificate from auditor and declaration by director of the company that the company is not in arrears of deposits or the interest thereon.
A certificate from Company’s Auditor to the effect that accounting treatment proposed by the company for reduction of share capital is in conformity with the AS specified in Section 133 of Companies Act, 2013
The Tribunal shall, within 15 days of submission of the application give notice, or direct that notice be given to –
the Central Government, Registrar of Companies, in Form No. RSC-2;
the Securities and Exchange Board of India. in the case of listed companies in Form No. RSC-2:
the creditors of the company, in all cases in Form No. RSC-3;

for seeking their representations and objections.

The Tribunal shall give directions for the above notice to be published, in Form No. RSC-4 within 7 days from the date on which the directions are given.

The notice shall state the amount of the proposed reduction of share capital, and the places, where the aforesaid list of creditors may be inspected, and the time as fixed by the Tribunal within which creditors of the company may send their objections.

Objections shall be filed in the Tribunal within three months from the date of publication of the notice with a copy served on the company.

File an affidavit within 7 days from the date of issue of such notices in Form No. RSC-5confirming the dispatch and publication of the notice.

Where the Tribunal is satisfied that the debt or claim of every creditor has been discharged or determined or has been secured or his consent is obtained, it may dispense with the requirement of giving of notice to creditors or publication of notice under this rule or both.

If the authorities or the creditors of the company desire to make any representation, the same shall be sent to the Tribunal within a period of three months from the date of receipt or notice and copy of such representation shall simultaneously be sent to the company and in case no representation has been received within the said period by the Tribunal it shall be presumed that they have no objection to the reduction.

Then the company shall submit to the Tribunal, within 7 days of expiry of period upto which representations or objections were sought, the representations or objections so received along with the responses of the company thereto.

The Tribunal may give such directions as it may think fit with respect to holding of any enquiry or adjudication or claims or for hearing the objection or otherwise.

At the hearing of the application, the Tribunal may, if it thinks fit, give such directions as may deem proper with reference to securing the debts or claims of creditors who do not consent to the proposed reduction, and the further hearing of the petition may be adjourned to enable the company to comply with such directions.

Where the Tribunal makes an order confirming a reduction, the order confirming the reduction and approving the minute may include such directions or terms and conditions as the Tribunal deems fit.

The order confirming the reduction of share capital and approving the minute shall be in Form No. RSC-6.

The Certificate issued by the Registrar shall be in Form No. RSC-7.

Procedure for Reduction of Share Capital

Ensure that its articles of association contain a provision authorizing reduction of share capital. If there is no such provision then the articles have to be first altered in accordance with the provisions of Section 14 of the Companies Act, 2013.
Convene and hold a Board meeting to –

(i) approve the scheme of reduction of share capital by a resolution;

(ii) fix time, date and venue for holding a general meeting of the company for passing a special resolution for reduction of share capital subject to confirmation by Tribunal as per provisions of Section 66 of the Act and for altering the capital clause in the memorandum of association of the company, as a consequence of reduction of share capital of the company;

Issue notice of the general meeting to all members, directors and auditors of the company.
Hold the general meeting and have the special resolution(s) passed.
File e-form MGT-14 along with a certified true copy of the special resolution(s), copy of explanatory statement and copy of altered Memorandum of Association and Articles of Association with the ROC within thirty days of the passing of the resolutions.
Apply to NCLT for confirmation of the capital reduction in form RSC-1 with fees of Rs. 5000/-
The Tribunal shall give notice of every application made to it under sub-section (1) to the Central Government, Registrar and the creditors of the company and shall take into consideration the representations, if any, made to it by that Government, Registrar, and the creditors within a period of three months from the date of receipt of the notice.

Provided that where no representation has been received from the Central Government, Registrar or the creditors within the said period, it shall be presumed that they have no objection to the reduction.

The Tribunal may, if it is satisfied that the debt or claim of every creditor 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 it deems fit. The order of confirmation of the reduction of share capital by the Tribunal under subsection shall be published by the company in such manner as the Tribunal may direct.

Forms under Reduction of Share Capital

RSC-1 – Application to Tribunal for Reduction of Share Capital Of A Company
RSC-2 – NCLT give notice and directions about Reduction Of Share Capital to Central Government and Registrar of Companies
RSC-3– NCLT give notice and directions about Reduction of Share Capital to Creditors of the Company
RSC-4– Publication of Notice
RSC-5 Affidavit on dispatch of Notice
RSC-6– Order of Reduction of Share Capital
RSC-7 – Certificate of Registration of Order and Minute