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

Under Section 66 of the Companies Act, 2013, the Tribunal will sanction a reduction of share capital only if a specified condition on accounting treatment is met. Which is it?

The Tribunal cannot sanction a reduction unless the proposed accounting treatment conforms to the accounting standards specified under Section 133 or other provisions of the Act, and the company's auditor has filed a certificate to that effect with the Tribunal.

  1. AThe proposed accounting treatment conforms to the accounting standards specified under Section 133 or other provisions of the Act, and the company's auditor's certificate to that effect is filed with the TribunalCorrect
  2. BThe reduction is approved by an ordinary resolution and a certificate from the company secretary is filed
  3. CThe accounting treatment is approved by the Registrar of Companies
  4. DThe reduction does not exceed one-fourth of paid-up capital

Explanation

The proviso to Section 66(3) bars sanction unless the accounting treatment conforms to the accounting standards and an auditor's certificate is filed with the Tribunal. A special resolution, not an ordinary resolution, is required, and no quantitative cap exists in the text.

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