January 13, 2017

Procedure of Reduction of Share Capital

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Procedure of Reduction of Share Capital

The Procedure for Reduction of Share Capital.

How to Reduce Share Capital of the Company

After company registration if any time the directors or members of the company decide that they want to reduce the share capital of the company following procedure should be followed as per the articles of companies’ ordinance, 1984:

  1. Un-paid share Capital

After company registration if a company may extinguish or reduce its liability on unpaid shares by reducing the capital to that extent.

  1. Lost or un-represented by assets of the company:

After company registration if some of the assets of the company is lost for example due to fire the capital of the company does not reflects such assets and therefore in such conditions the company may opt for reduction of share capital.

  1. Excess Capital:

After company registration if at any time the company feels that any paid up capital is in excess of its wants it may opt for reduction of such capital.

After Company Registration the procedure for reduction of share capital is as under:

  1. The directors of the company consider the proposal of reduction of share capital in their meeting and pass a resolution in this regard. The resolution should mention the amount of authorized capital, no of shares and reasons as to why company wants to reduce its share capital after registration.
  2. The next step is directors of the company call a meeting of the shareholders to pass a resolution for reducing the share capital. Notice of meeting shall be sent to the members at least 21 days before the meeting. If at the time of company registration the company was registered as listed company the aforesaid notice shall also be published in at least 2 newspapers circulating in the province where the stock exchange at which the company is listed is situated.
  3. The resolution for reducing share capital is discussed in the meeting and should be passed by a resolution of at least ¾ of the members of the company.
  4. Copy of special resolution is filed with the registrar on the concerned form 26.
  5. Consent of the creditors is obtained.
  6. Petition is filed to the court for order confirming reduction.
  7. Advertisement for reduction is published in newspaper on the direction of the court.
  8. On confirmation from court the following documents are filed with registrat.
  9. Certified copy of the order of the court
  10. Copy of special resolution on Form 26
  11. Amended copy of Memorandum and Articles of Association with new minutes forming part.
  12. Bank Challan as required by Securities and Exchange Commission of Pakistan.

Stock Exchanges are informed about the reduction of share capital.

Alteration shall be mentioned in all subsequent copies of memorandum and articles of association.

Words and reduced shall be added for one year or any other period if fixed by the court to the name of the company.