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How to reduction of share capital done?

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How to reduction of share capital done?

About Reduction of share capital:

Reduction of share capital means reducing share capital. Well, it is forbidden. But the company can do this with approval. If the financial position of the company is not good, then the company can affect its balance sheet by taking approval. If our company’s capital is reduced then our company’s base will be weak. We would never have invested as much as our share capital. Although the reduction of capital is not considered good, the company has been allowed it in some cases. 

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  • If the company buys 8 rupees from a shareholder for 10 rupees, then it also gets paid-up capital and called up capital and now it is not asking for 2 rupees because it has sufficient capital. 
  • Or even if there is a loss of capital, it will be a reduction of capital.
  • In this, the creditor’s fund will be reduced. When the value of the share is reduced, the shares affect the holder.
  • Those companies which have shared can reduce their capital. For this, a company limited by shares. And a company limited by guarantee can reduce their shares.
  • For this, if the article of association and memorandum of association give permission, then you can do it or else AOA and MOA will have to alter before that.


For this, we have to pass a special resolution

  1. The reduction of the part of the capital that we can either take or that we have taken is called a capital reduction.
  2. If reduction of capital includes paid up and uncalled capital. So if we decrease then the paid-up capital will be less.
  3. If uncalled capital is omitted, it is called extinguishment of capital.

Cancelation of the uncalled capital

If you have kept the money with us and are not able to use your fixed assists while you are able to make some percentage of it, then that investment can be made by making money anywhere else, then that uncalled capital can be reduced and Reduce the capital by reducing the return of capital, thereby reducing the holding to the shareholders.

 There can be 4 ways:

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  • The first is to reduce the value of the share.
  • Secondly, money that has been reduced can be withdrawn anytime.
  • Return of capital with extinguishing rights–
  • Return of capital without extinguishing rights –


 In this, the direct loss is of the shareholders. When we removed our old initial expenses and assist which had no value from the balance sheet.


When Tribunal Permission is not required to cut the company?

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  • Where such preference shares which the company is reducing do not require the permission of the Tribunal.
  • Permission of Tribunal is not required to reduce the shares whose money has not been taken.
  • For such shares whose money has not been received even after several demands of the company. Tribunal is not required to forfeited such shares.
  • When a share is surrendering itself or the company gets a gift, then Tribunal Permission is not required.
  • Where the company is purchasing its own shares, the Tribunal’s consent is not required.
  • When the Tribunal orders the company itself to purchase its shares.


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Where is the permission of the Tribunal required?

According to Section 66, if the registered company that has a company registration in India has issued shares by taking money from the market, then such company can deduct for which it will have to pass a special resolution and send a copy of it to the tribunal.

 You can reduce the capital in 3 ways:

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  • Reducing the amount of Unpaid capital
  • Write off the capital that he does not want
  • Capital can also be reduced by returning much of the capital that is not required.


  1. If the company has to pay something, then first it has to pay its arrears, and then you can reduce the share.
  2. Then the company has to pass a special resolution. And then the tribunal has to give the application.
  3. Tribunal ROC, SEBI, CREDITOR will give notice to everyone, if any of this objection is done, then Tribunal will hear it in 3 months.
  4. The Tribunal will sanction the application keeping in mind the shareholders, company, and creditor, and public.
  5. The Tribunal will first take steps keeping in mind the interest of the shareholders so that they will not suffer any loss.
  6. Creditors can objection to this if the company is reducing the uncalled capital.
  7. Or if the paid-up capital is being refunded, the creditor can objection.
  8. If the company is giving such shares to its shareholders, the assists are not having any effect on the creditor.
  9. The company will register the order with the ROC. How many shares are there, how many amounts are there. How many shares are the holders? It is all written in it.
  10. The company will publish it and the registrar will sanction it from that day it will come into effect. And the company can reduce its share capital. Thus reduction of capital can be done.


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