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CS Executive · Company Law and Practice · Share and Share Capital - Concepts

Vistara Engineering Ltd wishes to reduce its share capital by paying off paid-up capital that is in excess of the company's wants. It has passed a special resolution. However, it is in arrears in repaying a deposit accepted earlier and the interest on it. What is the position under section 66?

The reduction cannot be made. The proviso to section 66(1) prohibits any reduction of share capital while the company is in arrears in repaying deposits it accepted or the interest payable on them, even if a special resolution has been passed.

  1. AReduction may proceed once the Tribunal confirms it
  2. BReduction may proceed if the auditor certifies the accounting treatment
  3. CReduction may not be made while the company is in arrears in repayment of deposits or interest thereonCorrect
  4. DReduction may proceed if creditors give consent only

Explanation

The proviso to section 66(1) says no reduction shall be made if the company is in arrears in repayment of any deposits accepted by it or interest payable thereon. Special resolution, Tribunal confirmation and auditor certificate are still required in other cases but cannot cure this bar.

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