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

Under the Companies Act, 2013, which of the following is a ground on which a company limited by shares may reduce its share capital under Section 66, subject to Tribunal confirmation and a special resolution?

Cancelling paid-up share capital that is lost or unrepresented by available assets is a reduction under Section 66. The other options, such as cancelling untaken shares, stock conversion and sub-division, are alterations of share capital under Section 61 and not reductions needing Tribunal confirmation.

  1. ACancelling paid-up share capital which is lost or is unrepresented by available assetsCorrect
  2. BCancelling shares not yet taken or agreed to be taken by any person
  3. CConverting fully paid-up shares into stock
  4. DSub-dividing shares into shares of smaller amount

Explanation

Section 66(1)(b)(i) permits cancellation of paid-up share capital that is lost or unrepresented by available assets. Cancelling shares not taken (Section 61(1)(e)), conversion into stock and sub-division are alterations of share capital under Section 61. Section 61(2) says cancelling untaken shares is not a reduction.

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