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

Under section 66 of the Companies Act, 2013, which of the following is a condition for the Tribunal to sanction a company's application for reduction of share capital?

The Tribunal will sanction a reduction only if the company's auditor has filed a certificate that the proposed accounting treatment conforms to the accounting standards specified under section 133 or other provisions of the Act. Reduction also needs a special resolution and Tribunal confirmation, so an ordinary resolution or internal auditor certificate is not enough.

  1. AThe company's auditor has filed a certificate that the proposed accounting treatment conforms to the accounting standards specified under section 133 or other provisions of the ActCorrect
  2. BThe company must first obtain a certificate from its internal auditor under section 138
  3. CThe reduction must be approved by the company's lenders alone, without notice to the Registrar
  4. DThe reduction must be approved by an ordinary resolution of the members

Explanation

The proviso to section 66(3) bars sanction unless the proposed accounting treatment conforms to the accounting standards under section 133 or any other provision of the Act, and the company's auditor has filed a certificate to that effect with the Tribunal. A special resolution, not an ordinary one, is needed. The Tribunal must also give notice to the Central Government, the Registrar, SEBI (for listed companies) and the creditors.

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