NCLT approves reduction of share capital following special resolution by shareholders

The National Company Law Tribunal (NCLT) confirmed the reduction of share capital of the Applicant Company from Rs. 1,07,68,090 to Rs. 43,48,470, following a special resolution passed by shareholders. The NCLT approved the reduction by canceling shares held by non-promoter shareholders. The tribunal directed necessary alterations in the Memorandum of Association and outlined compliance requirements for the Applicant Company. This decision came after addressing issues related to the consideration of an affidavit by the Regional Director, valuation methods, compliance with SEBI regulations, and the appointment of an independent valuer as per SEBI guidelines.

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Issues:
1. Consideration of affidavit by Regional Director before passing the order.
2. Valuation methods for reduction of share capital.
3. Compliance with SEBI regulations for valuation and shareholder exit.
4. Appointment of an independent valuer as per SEBI guidelines.

Issue 1: Consideration of affidavit by Regional Director before passing the order

The National Company Law Tribunal (NCLT) initially approved the reduction of share capital of the Applicant Company. However, an objector filed an appeal, leading to the Hon'ble NCLAT setting aside the order due to the non-consideration of an affidavit by the Regional Director (RD). The NCLAT directed the NCLT to consider the affidavit and provide an opportunity for all parties to argue on the matter.

Issue 2: Valuation methods for reduction of share capital

The RD's affidavit highlighted that the company used the Discounted Cash Flow (DCF) method for valuation, but the valuation report was not shared with shareholders before approving the resolution. The objectors argued that the Net Assets Value (NAV) method would have resulted in a higher valuation per share compared to the DCF method. The RD questioned why certain assets and liabilities were not considered in the DCF valuation, leading to discrepancies in the valuation methods used.

Issue 3: Compliance with SEBI regulations for valuation and shareholder exit

The RD raised concerns about the company not following SEBI guidelines for shareholder exit and valuation. However, the NCLT clarified that for a company not listed with any recognized exchange, SEBI guidelines regarding conduct of meetings may not be applicable. The RD's assertion of compulsory exit for non-promoter equity shareholders was deemed flawed as the company was considered a 'going concern' entity.

Issue 4: Appointment of an independent valuer as per SEBI guidelines

The RD pointed out that the company did not appoint an independent valuer from SEBI's panel for valuation, as mandated by SEBI regulations. However, the SEBI counsel later clarified that the appointment issue was not pressed as the relevant SEBI notification postdated the auditor's appointment, thus having no retrospective effect. SEBI did not have any other objections in the matter.

In conclusion, after re-hearing the case, the NCLT confirmed the reduction of share capital of the Applicant Company based on the special resolution passed by the shareholders. The NCLT approved the reduction from Rs. 1,07,68,090 to Rs. 43,48,470 by cancelling shares held by non-promoter shareholders. The necessary alterations in the Memorandum of Association were directed to be made, and compliance with filing requirements was outlined for the Applicant Company.

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