Prima facie evidence of loss of capital supports court sanction for company capital reduction when a valid special resolution exists.

Court accepted prima facie evidence of loss of capital as sufficient to support sanction for a company's reduction of capital where a valid special resolution had been passed; the company's petition averments and the managing director's verification were treated as establishing loss. The register of members was held to be prima facie evidence of membership and, absent successful rectification proceedings, entries could not be impeached to defeat voting rights; contested share transfers were not proved fictitious and the reduction resolution was validly passed and sanctioned.

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Issues: (i) Whether there was evidence of loss of capital sufficient to support the company's resolution for reduction of capital; (ii) Whether the resolution to reduce capital was validly passed, having regard to challenges to certain share transfers and the entries in the register of members.

Issue (i): Whether there was evidence of loss of capital supporting the resolution for reduction of capital.

Analysis: The Company relied on the petition verified by the managing director stating past losses and that paid-up capital was unrepresented by available assets. The objector did not deny the existence of the loss; his affidavit accepted the loss but attributed its cause to mismanagement. Authorities cited establish that while courts prudently require evidence where the reduction is said to be founded on loss, jurisdiction exists where a special resolution has been duly passed; prima facie evidence of loss is sufficient in the absence of challenge to its existence.

Conclusion: The Court found there was satisfactory evidence of loss of capital and treated the averments in the company's petition as establishing loss.

Issue (ii): Whether the resolution was invalid because certain persons who voted were not properly qualified shareholders due to alleged improper share transfers.

Analysis: The objector alleged transfers were fictitious and that the transferor was absent when transfers were purportedly executed. The company answered that the transferees were registered members, the register was examined and appeared regular, and no application for rectification under the statute was made. The register of members is prima facie evidence of membership and, absent successful rectification proceedings, entries are to be accepted for the purpose of voting rights.

Conclusion: The Court held that the objector failed to prove the register entries were invalid; the persons whose names appeared were to be treated as qualified shareholders and the resolution was validly passed.

Final Conclusion: The appeal is allowed, the order refusing sanction for reduction of capital is set aside, and the company's petition prayers seeking reduction of capital are granted; the company bears its own costs below and the respondent is directed to pay the costs of the appeal.

Ratio Decidendi: Where a company seeking reduction of capital has passed a valid special resolution, the court will grant sanction if there is prima facie evidence of loss of capital and the register of members, being prima facie evidence of membership, is accepted unless successfully impeached by appropriate rectification proceedings.

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