Section 66: Reduction of share capital
This section is for the reduction of share capital by a company, subject to Tribunal confirmation and certain conditions.
The section, clause by clause
What the section says
In plain terms
(1)Subject to confirmation by the Tribunal on an application by the company, a company limited by shares or limited by guarantee and having a share capital may, by a special resolution, reduce the share capital in any manner and in particular, may—
A company limited by shares or guarantee with share capital can reduce its share capital in any manner, such as extinguishing or reducing liability on shares, cancelling or paying off paid-up share capital, with Tribunal confirmation through a special resolution.
(1)(a)extinguish or reduce the liability on any of its shares in respect of the share capital not paid-up; or
(1)(b)either with or without extinguishing or reducing liability on any of its shares,—
(1)(b)(i)cancel any paid-up share capital which is lost or is unrepresented by available assets; or
(1)(b)(ii)pay off any paid-up share capital which is in excess of the wants of the company, alter its memorandum by reducing the amount of its share capital and of its shares accordingly:
provisoProvided that no such reduction shall be made if the company is in arrears in the repayment of any deposits accepted by it, either before or after the commencement of this Act, or the interest payable thereon.
(2)The Tribunal shall give notice of every application made to it under sub-section (1) to the Central Government, Registrar and to the Securities and Exchange Board, in the case of listed companies, and the creditors of the company and shall take into consideration the representations, if any, made to it by that Government, Registrar, the Securities and Exchange Board and the creditors within a period of three months from the date of receipt of the notice:
The Tribunal must notify the Central Government, Registrar, Securities and Exchange Board, and creditors of the application, considering their representations within 3 months.
provisoProvided that where no representation has been received from the Central Government, Registrar, the Securities and Exchange Board or the creditors within the said period, it shall be presumed that they have no objection to the reduction.
(3)The Tribunal may, if it is satisfied that the debt or claim of every creditor of the company has been discharged or determined or has been secured or his consent is obtained, make an order confirming the reduction of share capital on such terms and conditions as it deems fit:
The Tribunal can confirm the reduction if all creditors' debts are discharged, determined, secured, or consented to, and the accounting treatment conforms to accounting standards, with an auditor's certificate.
provisoProvided that no application for reduction of share capital shall be sanctioned by the Tribunal unless the accounting treatment, proposed by the company for such reduction is in conformity with the accounting standards specified in section 133 or any other provision of this Act and a certificate to that effect by the company’s auditor has been filed with the Tribunal.
(4)The order of confirmation of the reduction of share capital by the Tribunal under sub-section (3) shall be published by the company in such manner as the Tribunal may direct.
The company must publish the Tribunal's confirmation order as directed.
(5)The company shall deliver a certified copy of the order of the Tribunal under sub-section (3) and of a minute approved by the Tribunal showing—
The company must deliver a certified copy of the order and minute showing share capital details to the Registrar within 30 days for registration.
(5)(a)the amount of share capital;
(5)(b)the number of shares into which it is to be divided;
(5)(c)the amount of each share; and (d) the amount, if any, at the date of registration deemed to be paid-up on each share, to the Registrar within thirty days of the receipt of the copy of the order, who shall register the same and issue a certificate to that effect.
(6)Nothing in this section shall apply to buy-back of its own securities by a company under section 68.
This section does not apply to a company buying back its own securities under section 68.
(7)A member of the company, past or present, shall not be liable to any call or contribution in respect of any share held by him exceeding the amount of difference, if any, between the amount paid on the share, or reduced amount, if any, which is to be deemed to have been paid thereon, as the case may be, and the amount of the share as fixed by the order of reduction.
A member's liability is limited to the amount paid on the share or reduced amount after reduction.
(8)Where the name of any creditor entitled to object to the reduction of share capital under this section is, by reason of his ignorance of the proceedings for reduction or of their nature and effect with respect to his debt or claim, not entered on the list of creditors, and after such reduction, the company 1[commits a default, within the meaning of section 6 of the Insolvency and Bankruptcy Code, 2016 (31 of 2016), in respect of the amount of his debt or claim],—
If a creditor was not aware of the reduction and the company defaults, members on the registration date may be liable to contribute to the debt, up to the amount they would have contributed if the company had commenced winding up.
(8)(a)every person, who was a member of the company on the date of the registration of the order for reduction by the Registrar, shall be liable to contribute to the payment of that debt or claim, an amount not exceeding the amount which he would have been liable to contribute if the company had commenced winding up on the day immediately before the said date; and
(8)(b)if the company is wound up, the Tribunal may, on the application of any such creditor and proof of his ignorance as aforesaid, if it thinks fit, settle a list of persons so liable to contribute, and make and enforce calls and orders on the contributories settled on the list, as if they were ordinary contributories in a winding up.
(9)Nothing in sub-section (8) shall affect the rights of the contributories among themselves.
The rights of contributories among themselves are not affected by sub-section (8).
(10)If any officer of the company—
An officer who knowingly conceals a creditor's name or misrepresents a debt is liable under section 447.
(10)(a)knowingly conceals the name of any creditor entitled to object to the reduction;
(10)(b)knowingly misrepresents the nature or amount of the debt or claim of any creditor; or
(10)(c)abets or is privy to any such concealment or misrepresentation as aforesaid, he shall be liable under section 447. 1*
(10)*.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 31 of 2016, s. 255 and the Eleventh Schedule, for “is unable, within the meaning of sub-section (2) of section 271, to pay the amount of his debt or claim,” (w.e.f. 15-11-2016).
- 1. Sub-section (11) omitted by Act 29 of 2020, s. 13 (w.e.f. 21-12-2020).
This section refers to
Referred to by
Search the whole Act, or ask it a question, in the interactive browser.
Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.