Diminution of share capital

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Swanand Gadgil (Querist)
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03 October 2013 What exactly is meant by the diminution of share capital? Is it cancellation of authorised capital or of issued capital?

Ajay Mishra

Ajay Mishra (Expert)
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03 October 2013 It is a kind of reduction of issued shares capital by the company.

The company can not reduced its authorised shares capital once its approved.

Ajay Mishra

Ajay Mishra (Expert)
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03 October 2013
Reduction of paid up share capital without sanction of the High Court/Tribunal:

All types of reduction of paid up share capital are not within the purview of the provisions of section 100 of the Companies Act, 1956. The following categories of reduction of paid up share capital are out of the ambit of the provisions of section 100 and need not follow the procedure therein and reduction may take place in such cases without obtaining sanction of the High Court/Tribunal:—
(a) Forfeiture of partly paid-up shares;
(b) Redemption of redeemable preference shares;
(c) Cancellation of shares neither issued nor committed;
(d) Purchase of shares by a company on order of the High Court/Tribunal;
(e) Buy back of Securities from its members. [Section 77A]
If a company in voluntary liquidation, after repaying its preference and ordinary share capital is revived with fresh share capital, which is less than earlier capital, it does not amount to reduction of capital. [Mcleod & Co. v S.K. Ganguly (1975) 45 Comp Cas 563 (Cal)].
When the capital is reduced by canceling any paid-up share capital, which is lost or is otherwise unrepresented by available assets, it is not mandatory to follow the procedure prescribed in sub-section (2) of section 101 unless the Court so directs. [Maneckchowk & Ahmedabad Mfg. Co. Ltd., In re (1970) 40 Comp Cas 819 (Guj)].
If an amount received by a company was not towards share capital, but was wrongly shown as such in balance sheet, provisions of sections 100 to 103 are not attracted when that amount is repaid. [Rupak Ltd. v Registrar of Companies (1984) 56 Comp Cas 206 (Pat)].

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