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CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Bharat Agro Ltd resolves in general meeting to cancel 20,000 unissued shares of ₹10 each that no person has taken or agreed to take, thereby diminishing its authorised capital. How does the Companies Act, 2013 treat this under Section 61?

Cancelling shares that no one has taken or agreed to take, and thereby diminishing authorised capital, is not deemed a reduction of share capital. Therefore the separate reduction procedure, including Tribunal confirmation, does not apply. It only needs the alteration route of Section 61.

  1. AIt is a reduction of share capital requiring Tribunal confirmation
  2. BIt is a reduction of share capital requiring a special resolution and creditors' consent
  3. CIt is not deemed a reduction of share capitalCorrect
  4. DIt is permitted only for shares that have been fully paid up

Explanation

Section 61(1)(e) permits cancelling shares not taken or agreed to be taken by anyone, and Section 61(2) says such cancellation is not deemed a reduction of share capital. So reduction procedures do not apply. It concerns unissued shares, not fully paid ones.

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