Tribunal approves company's share capital reduction under Companies Act, 2013

The Tribunal allowed the reduction of share capital as proposed by the company under section 66 of the Companies Act, 2013. The reduction involved canceling a specific number of equity shares with a premium per share determined based on a valuation report. The reduction was approved by the Board of Directors and members through a special resolution, and all necessary consents from creditors were obtained. Despite objections from the Income Tax Department, the Tribunal found the Applicant's responses satisfactory, citing a previous judgment allowing a similar reduction. The order detailed the refund process to shareholders and compliance undertakings, requiring submission to the Registrar of Companies and publication in a designated newspaper.

---

---

Issues:
Reduction of share capital under section 66 of the Companies Act, 2013.

Analysis:
1. The application was filed by the company for the reduction of its share capital under section 66 of the Companies Act, 2013. The company was registered under the Companies Act, 1956 and engaged in infrastructure projects and building projects. The Board of Directors decided that the excess capital impacts the return on equity and earnings per share, leading to the proposed reduction of share capital.

2. The share capital of the Applicant as of 31st March, 2019, was detailed, with the authorized and paid-up share capital specified. The proposed reduction involved reducing the paid-up share capital by cancelling a specific number of equity shares held by existing shareholders, with a premium per share determined based on a valuation report.

3. The Board of Directors passed a resolution for reducing the paid-up share capital, and an Extraordinary General Meeting was held where the members unanimously approved the reduction by passing a special resolution. The reduction was in line with the Articles of Association of the company, which provided for reduction by way of a special resolution.

4. The Applicant obtained consent from both secured and unsecured creditors, and a certificate from Charted Accountants regarding the list of creditors. The reduction was also subject to compliance with the publication requirements as directed by the bench.

5. The Regional Director raised certain observations regarding the reduction, including the remittance of excess capital to foreign shareholders and the need for RBI approval. The Applicant provided an undertaking to comply with FEMA 1999 and RBI regulations for the payment to foreign shareholders.

6. The Income Tax Department raised objections, but the Applicant's responses were deemed satisfactory by the Tribunal. A previous judgment was cited where a similar reduction of share capital was allowed by the Principal Bench.

7. Considering the lack of objections and compliance with legal requirements, the Tribunal allowed the reduction of share capital as proposed. The specific details of the reduction, refunding of the amount to shareholders, and compliance undertakings were outlined in the order, along with the approval of the form of minute under section 66(5) of the Companies Act, 2013. The order required delivery to the Registrar of Companies and publication in a designated newspaper within a specified timeframe.

---