Reduction of share capital

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caabhishekverma@gmail.com (Querist)
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05 January 2012 If a Company issue 1 fully paid up share of Rs 10 each against 2 partly paid up shares having face value of Rs 10 on which Rs 5 was paid up. Will this amount to REDUCTION OF CAPITAL u/s 100 (1)(a) of Companies Act 1956.?

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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05 January 2012 In My opinion, its not a Reduction of capital as you are not reducing the liability of shareholders in respect of unpaid capital.

Other views are solicited

caabhishekverma@gmail.com

caabhishekverma@gmail.com (Querist)
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11 January 2012 Thanks for your reply Mr. Mitesh. But in my opinion it amounts to reduction of share capital as liability is being reduced as the shareholders are receiving fully paid up shares in place of partly paid up.

The liability of shareholders is as under:

1) Liability before reduction
Behind two share, shareholder were liable to pay Rs 10 (Rs5+Rs5) which were unpaid.

2) Liability after reduction
Behind two shares, shareholder are not liable to pay anything as now shares are fully paid up.