Reduction of shares under the Scheme of Merger/ Amalgamation/ Arrangement:
Arrangement includes reorganisation of share capital of the company and reorganisation can involve reduction of share capital. The cancellation of the existing Shares of the company as mentioned in the Scheme of Merger/ Amalgamation/ Arrangement shall be effected as an integral part of the Scheme in pursuance of Sections 66 of the Act. The petition seeking confirmation of the court with respect to the scheme must also expressly mention that the company is also seeking, at the same time, the confirmation of the court with respect to the reduction of share capital, and that, while seeking the consent of the members to the scheme, the consent of the members with respect to the reduction of share capital had also been obtained and the order of the Tribunal sanctioning the Scheme shall be deemed to be also the Order under Section 66 of the Act for the purpose of confirming the cancellation and reduction. The cancellation and reduction would not involve either a diminution of liability in respect of unpaid share capital or payment of paid-up share capital and hence the provisions of Section 66 of the Act will not be applicable. Further, the company shall not be required to add the words “and reduced” as a suffix to its name consequent upon such reduction.
National Company Law Tribunal (Procedure for reduction of share capital of Company) Rules, 2016.
These rules govern the procedures at the National Company Law Tribunal in the proceedings of Scheme of Reduction of Share Capital. Various rules relevant to the proceedings under Sections 66, of the Companies Act 2013, are as follows:
R.2: Form of application or petition for Reduction of share capital under section 66:
- An application to the Tribunal to confirm a reduction of share capital of a company shall be in Form No. RSC-1 and fee shall be, as prescribed in the Schedule of fee to these rules.
- An application to confirm a reduction of share capital of a company shall be accompanied with ─
(a) the list of creditors duly certified by the Managing Director, or in his absence, by two directors, as true and correct, which is made as on a date not earlier than fifteen days prior to the date of filing of an application showing the details of the creditors of the company, class-wise, indicating their names, addresses and amounts owed to them;
(b) a certificate from the auditor of the company to the effect that the list of creditors referred to in clause (a) is correct as per the records of the company verified by the auditor;
(c) a certificate by the auditor and declaration by a director of the company that the company is not, as on the date of filing of the application, in arrears in the repayment of the deposits or the interest thereon; and
(d) a certificate by the company’s auditor to the effect that the accounting treatment proposed by the company for the reduction of share capital is in conformity with the accounting standards specified in section 133 or any other provisions of Act.
R.3: Issue of notice and directions by the National Company Law Tribunal
1) The Tribunal shall, within fifteen days of submission of the application under rule 2, give notice, or direct that notice be given to ─
(i) the Regional Director, Registrar of Companies, in all cases, in Form No. RSC-2;
(ii) the Securities and Exchange Board of India, in the case of listed companies in Form No. RSC-2;
(iii) the creditors of the company, in all cases in Form No. RSC-3;
seeking their representations and objections, if any.
The notice under clause (iii) above shall be sent, within seven days of the direction given under that sub-rule or such other period as may be directed by the Tribunal, to each creditor whose name is entered in the list of creditors submitted by the company about the presentation of the application alongwith amount of proposed reduction, reason for including name of the creditor in the said list and the time within which the creditor may send his representations and objections.
2) The notice to be published in the, as per the directions of the Tribunal, in Form No. RSC-4 within seven days from the date on which the directions are given, in English language in a leading English newspaper and in a leading vernacular language newspaper, both having wide circulation in the State in which the registered office of the company is situated and also upload on the website of the company, if any.
The objections to be filed with the Tribunal and a copy to be forwarded to the company within a period of 3 months of the publication of the Notice.
3) The company or the person who was directed to issue notices and the publication in the newspaper under this rule shall, as soon as may be, but not later than seven days from the date of issue of such notices, file an affidavit in Form No. RSC- 5 confirming the despatch and publication of the notice.
4) Where the Tribunal is satisfied that the debt or claim of every creditor has been discharged or determined or has been secured or his consent is obtained, it may dispense with the requirement of giving of notice to creditors or publication of notice under this rule or both.
R.4. Representation by Regional Director, Registrar etc. under sub-section (2) of section 66:
Any objections or representation to be made by authorities and\ creditors as stated in R. 3 clause (1). Shall be sent to Tribunal within 3 months from the date of receipt of notice and copy of such representation shall simultaneously be sent to the company and in case no representation has been received within the said period by the Tribunal it shall be presumed that they have no objection to the reduction.
R5: Procedure with regard to representations and objections received:
1) The company shall submit to the Tribunal, within seven days of expiry of period upto which representation or objection were received, along with the responses of the company to the said objection.
2) The Tribunal may give such directions as it may think fit with respect to holding of any enquiry or adjudication of claims or for hearing the objection or otherwise.
3) At the hearing of the application, the Tribunal may, if it thinks fit, give such directions as may deem proper with reference to securing the debts or claims of creditors who do not consent to the proposed reduction, and the further hearing of the petition may be adjourned to enable the company to comply with such directions.
R. 6: Order on application and Minute thereof:
1) Where the Tribunal makes an order confirming a reduction, the order confirming the reduction and approving the minute may include such directions or terms and conditions as the Tribunal deems fit.
(2) The order confirming the reduction of share capital and approving the minute shall be in Form No. RSC - 6 on such terms and conditions as may be deemed fit.
(3) The copy of order along with Minute to be filed with the Registrar within 30 days of the receipt of the copy of order. The registrar to register the same and issue a Certificate in Form No. RSC -7.
SCHEDULE OF FEES
|Sr. No.||Section of Companies Act, 2013||Nature of application / petition||Fees in Rs.|
|1.||Sub-Section (1) of Section 66.||Application for reduction of share capital||5000/-|