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

Deccan Polymers Ltd cancels 20,000 unissued shares of Rs 10 each which no person has taken or agreed to take, and reduces its authorised capital accordingly under Section 61(1)(e). How is this cancellation treated?

The cancellation is not deemed to be a reduction of share capital. Section 61(2) expressly says so for cancellation of shares not taken or agreed to be taken, so the reduction procedure with Tribunal confirmation does not apply.

  1. AIt is a reduction of share capital requiring Tribunal confirmation
  2. BIt is a reduction of share capital requiring creditor consent
  3. CIt is not deemed to be a reduction of share capitalCorrect
  4. DIt is treated as a buy-back of shares

Explanation

Section 61(2) states that cancellation of shares under sub-section (1) is not deemed a reduction of share capital. Hence no Tribunal confirmation process of reduction applies. It involves only shares not taken or agreed to be taken.

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