2019 (5) TMI 1894 - Tri - Companies Law

Company's Share Capital Reduction Approved, Publication & Compliance Required.

M/s. Yokogawa India Limited Versus The Registrar of Companies

The Tribunal approved the reduction of share capital as resolved by the company's Board of Directors and shareholders. The company was directed to publish ... Reduction of capital resolved by the special resolution - Sections 66 and 52 of the Companies Act, 2013, R/ w Rule 2(1) and Rule 3 of the NCLT (Procedure for Reduction of Share Capital of Company) Rules, 2016 - HELD THAT:- The Petitioner has published Notice in Form RSC-4 in English daily 'Hindu' and Kannada daily 'Kannada Prabha' on 28.11.2018. The observations/ opinions made by ROC as briefly stated supra, are satisfactorily answered by the Petitioner and thus the Tribunal is satisfied with the Company's proposal for Reduction of the Share Capital in question and deserves to be allowed as it followed the extant objects and procedure of the Company as detailed in its Memo and Articles of Association of the Company and also complied with all statutory requirement as set out in Section 66 of the Companies Act, 2013 and the extant rules made thereunder. Moreover, it would not in any way adversely affect the ordinary operations of the Company or the ability of the Company to honour its commitments or to pay its debts in the ordinary course of its business. It is hereby approved and confirmed the reduction of capital as approved by the Board of Directors of the Company in their meeting held on November 13, 2017 as set out in paragraph No. 8 of Company petition - Petition disposed off. Issues Involved:1. Reduction of Share Capital2. Compliance with Legal Provisions3. Impact on Creditors4. Valuation of Shares5. Use of Securities Premium Account6. Approval and Consent from Shareholders and CreditorsIssue-wise Detailed Analysis:1. Reduction of Share Capital:The petition was filed by M/s. Yokogawa India Limited under Sections 66 and 52 of the Companies Act, 2013, seeking approval for the reduction of share capital as resolved in a special resolution. The reduction involves canceling 244,531 equity shares of Rs. 10 each held by non-promoter shareholders and paying them Rs. 923.20 per share, which includes a premium of Rs. 913.20.2. Compliance with Legal Provisions:The company followed all statutory requirements set out in Section 66 of the Companies Act, 2013, and related rules. Notices were issued to all shareholders, creditors, and regulatory authorities, and the proposal was approved in an Extraordinary General Meeting (EGM). The company also adhered to the directions of the NCLT by publishing notices in newspapers and filing necessary forms with the Registrar of Companies (ROC).3. Impact on Creditors:The reduction of share capital does not affect the company's ability to honor its commitments or pay its debts. The creditors were notified, and no objections were received. The reduction does not result in the extinguishment or reduction of any liability in respect of unpaid share capital, and the asset cover ratio remains unaffected.4. Valuation of Shares:The company obtained a valuation report from an independent valuer, Grant Thornton India LLP, which determined the fair value of the shares to be Rs. 923.20 each. This valuation was considered and approved by the Board of Directors in their meeting.5. Use of Securities Premium Account:The company proposed to return the capital to outgoing shareholders from the securities premium account. The ROC raised concerns about the legality of this use under Section 52 of the Companies Act, 2013. However, the company argued that the reduction of capital is a transparent process subject to shareholder approval and Tribunal supervision, and it chose this method over buyback as it aligns with the shareholders' requests for liquidity.6. Approval and Consent from Shareholders and Creditors:The proposal was overwhelmingly approved by the shareholders, with 99.99% voting in favor. The company also obtained consent from the majority of its creditors. The ROC's observations were satisfactorily addressed by the company, and the Tribunal found no adverse impact on the company's operations or its ability to meet its obligations.Conclusion:The Tribunal approved the reduction of share capital as resolved by the company's Board of Directors and shareholders. The company was directed to publish the reduction in newspapers, deliver certified copies of the order to the ROC and other statutory authorities, and comply with all necessary formalities within 30 days. No order as to costs was made.