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

Gangotri Ltd proposes to reduce share capital under Section 66. As quoted, which condition must be met before the Tribunal sanctions the application?

The Tribunal cannot sanction the reduction unless the proposed accounting treatment follows the accounting standards specified under Section 133 and the company's auditor has certified this, with the certificate filed with the Tribunal.

  1. AThe accounting treatment proposed must conform to the accounting standards specified under Section 133 and the company's auditor's certificate to that effect must be filed with the TribunalCorrect
  2. BThe reduction must be approved by an ordinary resolution of the Board only
  3. CThe company must first obtain the written consent of every shareholder
  4. DThe company must have declared a dividend in each of the preceding three years

Explanation

The proviso to Section 66(3) bars sanction unless the proposed accounting treatment conforms to the standards under Section 133 and the auditor's certificate has been filed with the Tribunal. A special resolution, not a Board ordinary resolution, is required, and the Act does not require unanimous consent or a dividend record.

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