2004 (5) TMI 315 - HC - Companies Law

Summary

Issues:
Utilization of Securities Premium Account for writing off accumulated losses and reduction of equity shares capital.

Analysis:
The petition was filed by a company under sections 78 and 100 to 104 of the Companies Act for the utilization of the Securities Premium Account to write off accumulated losses and reduce equity shares capital. The company's shares were not listed on any stock exchange, and it had three subsidiary companies. The company's financial position and capital structure were detailed in the petition.

The company proposed to write off accumulated losses and reduce the face value of its shares due to losses suffered during the 'dotcom' bubble burst. Shareholders provided consent for the proposed reduction in an Extraordinary General Meeting. The company was authorized by the Companies Act and its Articles of Association to reduce share capital. The company aimed to improve its financial position and capitalize on the bullish trends in the economy.

The notice of the EGM was sent to all members and auditors as required by law. The special resolution for reduction of share capital was passed unanimously in the EGM. The resolution did not involve diminution of any liability or affect the interests of members, creditors, or the public. The company had no secured creditors, and unsecured creditors consented to the proposal.

No pending investigations were reported against the company under relevant sections of the Act. The petition was admitted for hearing, and no objections were raised by shareholders, creditors, or employees. The Court found no illegalities or public policy violations and allowed the petition based on commercial wisdom, shareholder consent, and creditor approval. The decision to reduce share capital was deemed just, fair, and reasonable, with full compliance with legal procedures.

In conclusion, the petition was allowed, granting the company permission to utilize the Securities Premium Account for writing off accumulated losses and reducing equity shares capital, with liberty granted as per the prayer clauses.