2015 (6) TMI 1224 - HC - Companies Law

Reduction of share capital - Sections 100 to 104 of the Companies Act, 1956 (read with Rule 46 of the Companies (Court) Rules, 1959 - HELD THAT - This Court is of the opinion that there can be no legally sustainable objection for approving the reduction of share capital in terms of Article 57 of the Articles of Association, which enables the company to reduce the share capital, more so, when the reduced share capital is resulting in repaying the share value to the shareholders at a premium of ₹ 11.50ps per share. The Company Petition is allowed by approving the reduction of share capital of the petitioner company as per the form of Minute proposed to be registered - Application allowed.

Summary

Issues:
Confirmation of reduction of share capital under Sections 100 to 104 of the Companies Act, 1956.

Analysis:
The petitioner, a company incorporated under the Companies Act, sought approval for the reduction of its share capital. The company had a registered office in Hyderabad and engaged in various business activities related to computer hardware and software. The Board of Directors decided to reduce 60% of the paid-up equity share capital due to an excess of shareholders' funds not effectively deployed in the business. The reduction involved canceling and extinguishing equity shares and returning the value to shareholders at a premium. The reduction proposal was approved through a special resolution by the shareholders in an extraordinary general meeting conducted via e-voting. The company complied with the necessary procedures, including issuing notices, filing reports, and repaying trade creditors. The Court found no legally sustainable objection to approving the reduction, especially considering the premium offered to shareholders. The Company Petition was allowed, and the reduction of share capital was approved as per the proposed Minute. The petitioner was directed to deliver a certified copy of the order to the Registrar of Companies and publish the form of Minute in newspapers within specified timelines.

This judgment primarily dealt with the confirmation of the reduction of share capital by a company under Sections 100 to 104 of the Companies Act, 1956. The Court considered the company's compliance with legal requirements, including provisions in the Articles of Association allowing for such reduction and the approval process involving shareholders through a special resolution. The Court emphasized the importance of following proper procedures, such as issuing notices, conducting meetings, and obtaining necessary approvals, to ensure transparency and legality in reducing the share capital. The Court's decision was based on the company's fulfillment of statutory obligations and the absence of objections, ultimately leading to the approval of the reduction of share capital.

In conclusion, the judgment reflected a thorough analysis of the company's petition for the reduction of share capital, highlighting the procedural adherence, shareholder approval, and legal basis for the decision. The Court's approval was based on the company's compliance with relevant provisions of the Companies Act and its Articles of Association, ensuring transparency and fairness in the process of reducing the share capital. The detailed examination of the company's actions and the absence of objections supported the Court's decision to allow the reduction and approve the proposed Minute for registration, emphasizing the importance of legal compliance and shareholder protection in corporate actions.