CMA Final · Corporate Financial Reporting · Internal Reconstruction (Capital Reduction)
Meera Textiles Ltd proposes to reduce its share capital under section 66. Which statement about the Tribunal's powers and the creditors is correct as per the Act?
The Tribunal may confirm the reduction only when satisfied that each creditor's debt or claim has been discharged, determined or secured, or the creditor has consented. A special resolution alone does not compel confirmation, and silence by creditors only presumes no objection.
- AThe Tribunal may confirm the reduction if it is satisfied that every creditor's debt has been discharged, determined, secured or the creditor's consent obtainedCorrect
- BThe Tribunal must confirm the reduction if the special resolution is passed, whatever the position of creditors
- COnly secured creditors are given notice of the application
- DCreditors who do not object within three months lose their debts
Explanation
Section 66(3) lets the Tribunal confirm the reduction if it is satisfied that each creditor's debt or claim has been discharged, determined, secured or consented to. Confirmation is not automatic after the resolution. Notice goes to the creditors generally, and silence for the period only creates a presumption of no objection, not extinguishment of the debt.
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