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2012 (3) TMI 41 - HC - Companies LawReduction of Share Capital - Recessionary Conditions - no explanatory statement along with notice of AGM - Held That - As there were no creditors on the date of passing special resolution, no objection from any other party. Company may be permitted to reduce the share capital from Rs. 12,64,10,930/- divided into 1,26,41,093/-equity shares of Rs. 10/- each to Rs. 9,14,10,930/-. equity shares of Rs. 10/- each.
Issues:
Petition filed under Sections 101(3) to 104 of the Companies Act, 1956 seeking reduction of share capital. Analysis: The petition sought to reduce the share capital of a Company originally incorporated under the Companies Act, 1956. The Company's authorized share capital was Rs. 15,00,00,000 divided into 1,50,00,000 equity shares of Rs. 10 each, with a subscribed and paid-up share capital of Rs. 12,64,10,930. The Company, a subsidiary of a US-based corporation, aimed to set up manufacturing facilities in India. A resolution was passed in an Extraordinary General Meeting held on 28.1.2011 to reduce the share capital to Rs. 9,14,10,930. The Board was empowered by the Articles of Association for such reduction. The petitioner cited recessionary conditions in the Manufacturing Sector as a reason for postponing the Company's expansion, leading to the decision to reduce share capital and transfer funds to the USA. The Company was exempted from sending an explanatory statement with the meeting notice. The petition clarified that the reduction did not involve diminishing any liability regarding unpaid capital, and there were no creditors. Auditors' reports confirmed the absence of creditors, and notices were published inviting objections, none of which were received within the stipulated period. The Court dispensed with the notice to creditors based on the circumstances. Considering these facts, the Court approved the reduction of share capital to Rs. 9,14,10,930, comprising 91,41,093 equity shares of Rs. 10 each. The Court allowed the petition, confirming the Special Resolution for reducing the share capital and approving the proposed minutes.
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