Reduction of Share Capital

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The user’s text is already written in a legal manner, accurately referencing the definition of Share Capital under section 2(v) of the Companies Act, 1994. No further rewriting is necessary. Companies engage in the issuance of shares for the purpose of facilitating the advancement, development, and expansion of their business operations.

In certain instances, it is not uncommon for businesses to engage in the practice of procuring financial resources from creditors in order to fortify their capital. When a company makes the determination to decrease its share capital, it is imperative that due consideration be given to the potential ramifications on its capacity to fulfill its financial obligations.

The diminution of share capital has a direct impact on the subscribed paid-up capital, while the authorized capital remains unaffected. The term ‘capital’ as it pertains to share capital encompasses a multitude of facets, one of which is the notion of paid-up capital. Paid-up capital, in this context, pertains to the factual sum disbursed by the shareholders.

The diminution of share capital has a direct impact on the subscribed paid-up capital, while the authorized capital remains unaffected. The term ‘capital’ as it pertains to share capital encompasses a multitude of facets, one of which is the notion of paid-up capital. Paid-up capital, in this context, pertains to the factual sum disbursed by the shareholders.

  • Authorization for decrease in firm Articles of Association.
  • Special resolution to reduce capital.
  • Bangladesh Supreme Court High Court Division approved the cut.

Reducing share capital requires the following

steps-

1. Review Articles of Association: Please be advised to thoroughly examine the company’s Articles of Association in order to ascertain the permissibility of reducing the share capital within the confines of the company’s constitution, and to ascertain the precise protocols to be adhered to in this regard.

2. Special General Meeting: Additionally, it is imperative to convene a special general meeting in order to deliberate upon the matter of capital reduction. It is crucial to adhere to the legal requirement of providing a notice period of no less than twenty-one days in advance of said meeting.

The aforementioned notice must be duly disseminated to each and every Director, Member, Company Auditor, Secretarial Auditor, and any other individual who is rightfully entitled to receive the notice pertaining to the General Meeting. The approval of the resolution for capital reduction necessitates the attainment of a majority vote, specifically three-fourths of the members.

 

3. Court Approval: In the event that a company has made the determination to diminish its share capital, it is imperative that said company proceeds to initiate the filing of a formal petition with the esteemed High Court of the Supreme Court of Bangladesh, seeking confirmation of such resolution.

This course of action is in strict compliance with the provisions set forth in Section 60 of the Companies Act. The petitioners are under a legal obligation to fully disclose all pertinent facts and provide substantiating evidence demonstrating that the requested reduction is in alignment with the principles of public policy.

In accordance with the company’s prerogative, it retains the authority to determine the manner and schedule for capital reduction. However, it is imperative for the court to accord primacy to the concerns of minority shareholders and diligently safeguard the rights of creditors.

Moreover, it is imperative that the court diligently evaluate the underlying justification for the capital reduction and ascertain the extent to which the aforementioned procedure adheres to principles of fairness and equity.

In the event that the court, upon careful examination, discerns the true purpose underlying the capital reduction and deems it to be a measure aimed at safeguarding the interests of creditors, it possesses the authority to decree said reduction in accordance with Section 64 of the Companies Act 1994, provided that all creditors who possess the right to raise objections have duly granted their consent.

Furthermore, it is within the purview of the court to potentially request the company to make a public declaration regarding the aforementioned reduction, should it determine such action to be necessary in accordance with the provisions outlined in Section 69 of the Companies Act 1994.

 

4. RJSC Approval: Upon receipt of the court’s order, it is incumbent upon the company to duly furnish specific documents, as delineated in Section 65 of the Companies Act 1994, to the Register of the Joint Stock Companies and Firms. The aforementioned documents encompass:

  • Certified document of Court order reducing corporation share capital.
  • The Court’s approved minutes showing the lowered share capital, number of shares, and nominal value of each share.

The reduction shall be deemed effective upon the receipt of the confirmation order from the Register of the Joint Stock Companies and Firms. The aforementioned Registrar of Joint Stock Companies (RJSC) shall proceed to duly register the reduction and subsequently furnish a certificate as irrefutable evidence thereof. This aforementioned certificate hereby serves as irrefutable and incontrovertible evidence of the duly executed capital reduction.

In the event that the reduction of share capital gives rise to any potential conflicts with respect to outstanding payments owed to shareholders, it is within the purview of creditors to raise objections and seek legal recourse by initiating court proceedings.

Pursuant to the provisions set forth in the applicable laws and regulations, it is hereby stated that shareholders, who possess a minimum of one-tenth of the paid-up capital of the company, are entitled to initiate legal proceedings against the actions undertaken by the company.

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