Reduction of capital may proceed where loss of capital is shown and the register supports shareholder voting rights.

A reduction-of-capital petition may be supported by a clear showing that capital has been lost, and such loss is not the only jurisdictional condition for relief. Where the petition and affidavit state that capital was lost, and that factual assertion is not disputed, the Court may treat the loss as established. A special resolution authorising reduction is not invalid merely because voting shareholders are later challenged, if the register of members remains unrectified and stands as prima facie evidence of membership. On those facts, the company was entitled to proceed with the proposed reduction.

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Issues: (i) Whether the company had shown sufficient loss of capital to justify reduction of share capital; (ii) Whether the special resolution authorising reduction was invalid because certain persons who voted were not duly qualified as shareholders.

Issue (i): Whether the company had shown sufficient loss of capital to justify reduction of share capital.

Analysis: The company's petition and supporting affidavit contained a clear statement that capital had been lost, and that assertion was not disputed by the objecting shareholder. In proceedings for reduction of capital, it is prudent to require evidence of the factual basis for the proposed reduction where the reduction is founded on loss of capital, but the existence of such loss is not the sole jurisdictional condition. The material before the Court established that the loss claimed by the company was real and was admitted in substance by the objector.

Conclusion: The issue was decided in favour of the company.

Issue (ii): Whether the special resolution authorising reduction was invalid because certain persons who voted were not duly qualified as shareholders.

Analysis: The challenge to the resolution rested on allegations that certain transfers were fictitious and that the transferees were not entitled to vote. The register of members showed those persons as shareholders, and no proceedings were taken to rectify the register. The register was therefore prima facie evidence of membership, and the objector failed to establish that the persons concerned were not qualified to vote at the meetings at which the special resolution was passed and confirmed.

Conclusion: The issue was decided in favour of the company.

Final Conclusion: The refusal to sanction reduction of capital was set aside and the company was held entitled to proceed with the proposed reduction.

Ratio Decidendi: In a reduction-of-capital petition, where the special resolution has been duly passed and the register of members remains unrectified, the Court may act on the register as prima facie evidence of membership and sanction the reduction if no sufficient ground is shown to refuse relief.

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