Question 18 can a public limited company reduce its

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Question 18Can a Public Limited Company reduce its Share Capital? If so, when and how?Also state the procedure it has to follow for doing so.(November, 2001)AnswerReduction of Share Capital:A company is allowed to reduce its share capital subject to special safeguards.Section 100 of the Companies Act, 1956. provides that a company, limited byshares or guarantee and having share capital, if so authorised by the articles,may by special resolution and the confirmation of the Court, reduce its sharecapital in any way and in particular by.(a) extinguishing or reducing the liability of members in respect of thecapital not paid up;(b) writing off or cancellation any paid-up capital which is in excess of theneeds of the company,(c)paying off any paid-up share capital which is in excess of the needs of thecompany.Reduction in (b) and (c) may be made either in addition or withoutextinguishing or reducing the liability of the member for uncalled capital.Reduction of share capital may in reality take three forms, viz..1.Reducing the value of shares in order to absorb the accumulated lossessuffered by the company without any payment to the shareholders.2.Extinction of liability of capital not paid; and3.Paying off any paid up share capital,The interest of creditors is involved only in the cases stated in 2 and 3.Procedure to be adopted1.A special resolution is to be passed under Section 100.2.An application is to be made under Section 101 to the Court for an orderconfirming the reduction.
3.After the petition for Court’s confirmation is filed, the Court must settlethe list of creditors who are entitled to object such as creditors having adebt or a claim admissible on a winding up.4.The Court must ascertain the names of those creditors and the natureand amount of their debts or claims.5.The Court may publish notices fixing a day or days within which thecreditors not entered on the list are to claim to be so entered or are to beexcluded from the right of objecting to the reduction.6.The Court has power to dispense with the consent of the dissentingcreditor, on the company securing the paying of the debt or claim byappropriating the full amount of the amount fixed by the Court.However, the Court has discretionary power having regard to any specialcircumstances of the case to direct that the provisions of Section 101(2) shallnot apply as regards any classes of creditors. The special circumstancesshould be convincing to the Court.After being satisfied the Court may make an order confirming the reductionon such terms and conditions as it thinks fit. The company then has to put thewords “and reduced” to the name of the company.Question 19What conditions as required under the Companies Act, 1956 must be satisfiedby a company for the forfeiture of shares of a member, who has defaulted thepayment of calls? What are the consequences of such forfeiture?(November, 2001)AnswerFORFEITURE OF SHARES AND THE CONSEQUENCESCONDITIONS TO BE SATISFIED FOR FORFEITURE:1.

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Term
Spring
Professor
xat
Tags
Business, Contract Law, Indian Contract Act

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