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CMA Final · Corporate Financial Reporting · Internal Reconstruction (Capital Reduction)

As per section 66 of the Companies Act, 2013, what is the position of a member's liability on a share whose capital has been reduced by the Tribunal's order?

A past or present member is not liable for any call or contribution on a share beyond the difference between the amount paid, or the reduced amount deemed paid, and the amount of the share as fixed by the order of reduction. Liability is therefore limited by the reduced figure, not the original nominal value.

  1. AThe member is liable for calls up to the original nominal amount of the share
  2. BThe member is not liable for any call or contribution exceeding the difference between the amount paid or deemed paid on the share and the amount of the share fixed by the order of reductionCorrect
  3. CThe member is liable for the full amount of reduction to creditors in all cases
  4. DThe member's liability ceases entirely once the Registrar registers the order

Explanation

Section 66(7) limits a member's liability on a share to no more than the difference between the amount paid, or reduced amount deemed paid, and the amount of the share fixed by the order of reduction. It does not continue to the original nominal value. Separately, under section 66(8) members may contribute to an unlisted creditor's claim, so liability does not cease entirely.

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