Skip to content

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

Under section 66 of the Companies Act, 2013, a company limited by shares proposes to reduce its share capital. Which of the following is a condition for the Tribunal to sanction the reduction?

The Tribunal can sanction a capital reduction only if the company's proposed accounting treatment conforms to the accounting standards and the auditor's certificate to that effect has been filed with the Tribunal. A special resolution and Tribunal confirmation are also needed, but no unanimity or dividend history is required.

  1. AThe accounting treatment proposed must conform to the accounting standards, with an auditor's certificate to that effect filed with the TribunalCorrect
  2. BThe reduction must be approved by an ordinary resolution without any Tribunal confirmation
  3. CThe company must first obtain consent from every shareholder individually
  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 accounting standards and the auditor's certificate has been filed with the Tribunal. Section 66(1) needs a special resolution plus Tribunal confirmation, so an ordinary resolution without confirmation is wrong. There is no dividend-history or unanimous-consent requirement.

Did you get it right without looking?

One question tells you little. A timed set on Internal Reconstruction (Capital Reduction) shows your real accuracy, how long you take and where you lose marks.

Practise Internal Reconstruction (Capital Reduction)Free diagnostic mock

More Internal Reconstruction (Capital Reduction) questions