2015 (9) TMI 1579 - HC - Companies Law

Reduction of paid up share capital - resolution passed by special resolution dated 16.4.2015 - Held that - The proposed set off of the accumulated losses against the paid up share capital and the write off of the amount in the securities premium account of the company are only book entries and have no financial outlay/outgo whatsoever to the shareholders of the company. The proposed reduction of the share capital will not in any way adversely affect the operation of the petitioner -company. In the circumstances, having regard to the petition averments and the resolution passed at the Extraordinary General Meeting held on 16.4.2015, the prayer can be granted. The reduction of share capital as resolved at the Extraordinary General Meeting held on 16.4.2015 granted.

Summary

Issues:
1. Reduction of paid-up share capital as per special resolution dated 16.4.2015.

Analysis:
1. The petitioner-company sought a reduction in its paid-up share capital as per a special resolution passed on 16.4.2015.
2. The company, engaged in the manufacture and sale of automotive ball bearings, was incorporated on 23.6.2009 and is a wholly owned subsidiary of a Japanese company.
3. The authorized share capital of the company was &8377; 426,80,00,000 divided into 42,68,00,000 equity shares of &8377; 10 each, with the issued, subscribed, and paid-up capital being &8377; 426,28,55,030 divided into 42,62,85,503 fully paid-up equity shares.
4. At an Extraordinary General Meeting on 16.4.2015, it was resolved to reduce the share capital by recalling, canceling, and extinguishing a portion of the existing shares and writing off losses from the paid-up capital and the security premium account.
5. The reduction in capital aimed to write off accumulated losses and not change the number of shareholders, with no financial impact on them.
6. The company's financial restructuring was necessary to wipe out previous losses and align with the current business environment, ensuring a true and fair representation of its financial position.
7. The court allowed the petition, confirming the reduction in share capital and the write-off of the security premium account, as proposed in the resolutions passed at the Extraordinary General Meeting.

Judgment:
- The court granted the petition, confirming the reduction of share capital as resolved at the Extraordinary General Meeting held on 16.4.2015.
- The resolution included reducing the share capital, writing off losses, and adjusting the same against the profit and loss account.
- The petitioner was directed to deliver a certified copy of the order and approved minutes to the Registrar of Companies within 21 days and publish the notice of reduction in share capital in designated newspapers within 14 days from the order's registration.