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of <h1>Court approves reduction of share capital to reflect true value, no adverse effect on creditors</h1> <h3>In Re:-ETA Power Gen Private Limited</h3> In Re:-ETA Power Gen Private Limited - TMI Issues:Confirmation of reduction of share capital by setting off accumulated losses as per special resolution.Analysis:The Company Petition was filed under Sections 100 to 104 of the Companies Act, 1956, seeking confirmation of the reduction of the petitioner's share capital by setting off accumulated losses. The petitioner, a Private Limited Company engaged in power generation, had incurred significant losses over the years, resulting in substantial accumulated losses. To reflect the true value of the company's assets, the Board of Directors approved the reduction and adjustment of losses against the equity share capital. A special resolution was passed for this purpose, aiming to reduce the equity share capital by adjusting a substantial portion of the losses. The proposal did not involve any adverse effects on creditors, as the shares to be reduced were fully paid, and no cash outflow was required. The reduction was intended to rationalize the capital structure and provide a more accurate representation of the company's assets. The Articles of Association permitted the reduction of share capital, and shareholder approval was obtained through an extraordinary general meeting.The petitioner provided detailed documentation supporting the reduction, including the Memorandum of Association, Annual Report, creditor no-objection letter, notice of the extraordinary general meeting, and the special resolution passed by shareholders. The special resolution outlined the reduction of paid-up equity share capital and accumulated losses, along with authorizing directors to take necessary actions to implement the reduction. A Form of Minute was also prepared, specifying the reduction of share capital and the resulting new share structure. Public advertisements were published to notify stakeholders of the proposed reduction.The Regional Director of the Ministry of Corporate Affairs supported the reduction scheme, confirming the petitioner's compliance with statutory requirements and lack of objections to the reduction. Considering all submissions and documentation, the Court ordered the confirmation of the share capital reduction, approval of the proposed minute, and dispensation with specific wording related to the adjustment in share capital. The petitioner was directed to deliver a certified copy of the order to the Registrar of Companies and publish the registration order in designated newspapers. Additionally, the petitioner was instructed to pay a fee to the Additional Central Government Standing Counsel.In conclusion, the Court granted the relief sought by the petitioner, confirming the reduction of share capital by setting off accumulated losses as per the special resolution, and directing necessary actions for implementation and compliance with legal requirements.
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