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Procedure for reduction of share capital by a pvt ltd compan

j.rambabu (student) (24 Points)

20 May 2016

hai , can any body guide , procedure for reduction of share capital by a private limited company , having 20 lakhs share capital and 15 lakhs as loss ,

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3 Replies

P C Agrawal (Registered independent director Past Ch) (8229 Points)
Replied 21 May 2016

You have to get approval of High Court under Companies Act 1956.

Kamal Kumar (B.Com) (647 Points)
Replied 21 May 2016

Please view the relevant board resolution for the same at the below link where you can get an idea about the formalities to be taken care for reduction of share capital:

https://www.dokmart.com/store/search?q=reduction+of+share

Praveen Tawania (Owner) (369 Points)
Replied 23 May 2016

reduction procedure

Step 1	Lodge a Form 2560 Notification of reduction in share capital details with us and attach: notice of the meeting at which it is proposed to pass the resolution to reduce the share capital any document relating to the reduction that will accompany the notice of the meeting sent to members. Lodging period: Public listed company – Before the notice of meeting is sent to the members and no less than 29 days before meeting. Any other company – Before the notice of meeting is sent to the members and no less than 22 days before meeting.
Step 2	Send notice of meeting and any accompanying documents to members.
Step 3	Hold a general meeting to pass the resolution. This may be an ordinary resolution passed by a simple majority unless the company's own constitution requires a special resolution in these circumstances.
Step 4	Reduce the share capital.
Step 5	Lodge a Change to company details (Form 484 - online) within 28 days after reducing the share capital to advise of: any changes to the company's share structure table; and for proprietary companies only – any changes to the details of the shares held by the top 20 members of any affected share class.

Selective reduction procedure

Step 1	Lodge a Form 2560 Notification of reduction in share capital details and attach: notice of the meeting at which it is proposed to pass the resolution to reduce the share capital any document relating to the reduction that will accompany the notice of the meeting sent to members. Lodging period: Public listed company – Before the notice of meeting is sent to the members and no less than 29 days before meeting. Any other company – Before the notice of meeting is sent to the members and no less than 22 days before meeting.
Step 2	Send notice of meeting and any accompanying documents to members.
Step 3	Hold a general meeting. Reduction must be approved by either: a special resolution with no votes being cast in favour of the resolution by any person who is to receive consideration as part of the reduction or whose liability to pay amounts unpaid on shares is to be reduced, or by their associates; OR a resolution agreed to by all ordinary members. If the reduction involves the cancellation of shares the reduction must also be approved by a special resolution passed at a separate meeting of the members whose shares are to be cancelled .
Step 4	Within 14 days after the passing of the resolution the company must lodge a Form 2205 Notification of resolutions regarding shares.
Step 5	14 days after lodging the Form 2205, reduce the share capital.
Step 6	Lodge a Change to company details (Form 484 - online) within 28 days after reducing the share capital to advise of: any changes to the company's share structure table; and for proprietary companies only – any changes to the details of the shares held by the top 20 members of any affected share class.

Special conditions for single member companies

A single member company does not need to issue a notice of meeting or hold a meeting to pass a resolution. A company that has only one member may pass a resolution by the member recording it and signing the record. In this situation, the company is not required to lodge any documents with us relating to the share capital reduction before the resolution is passed.

For a selective reduction in capital only, once the resolution is passed by the single member, the company is required to lodge a Form 2205. The text of the resolution as passed can be set out on the form or a copy of the resolution signed by the single member attached as an annexure to the form. Passage of the resolution must also be recorded in the company's minute book . The company is required to lodge a Form 484 within 28 days after reducing the share capital to advise of:

any changes to the company's share structure; and
for proprietary companies only – any changes to the details of the shares held by the member of any affected share class.

This is Information Sheet 56 (INFO 56), reissued in January 2014. Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.