The Statutory Gateway
Section 66 permits a company to reduce its share capital by special resolution, subject to the confirmation of the NCLT. The reduction may take the form of extinguishing or reducing the liability on unpaid shares, cancelling paid-up capital that is lost or unrepresented by available assets, or paying off surplus capital. The NCLT’s confirmation is mandatory; a reduction without it is void.
The Creditor Consent Requirement
The NCLT must be satisfied that the creditors’ interests are protected. The company must give notice to the creditors and, where the creditor does not consent, the NCLT may dispense with the consent if it is satisfied that the creditor’s claim is secured or will be paid. The creditor’s objection is a substantive safeguard, not a procedural hurdle.
The Solvency Statement
The company must file a solvency statement confirming that it will be able to pay its debts as they fall due in the year following the reduction. A false solvency statement is a criminal offence, and the directors who sign it are personally liable. The solvency statement is the NCLT’s primary assurance that the reduction will not prejudice the creditors.
The NCLT’s Scrutiny
The NCLT examines whether the reduction is fair and equitable to all classes of shareholders, whether the creditors are protected, and whether the reduction is in the public interest. The Tribunal may impose conditions, require further evidence, or direct the company to publish notices. The order confirming the reduction is filed with the ROC, and the reduction takes effect from the date of registration.
The Practical Documentation
The file should contain the special resolution, the solvency statement, the creditor notices and consents, the NCLT petition, the Tribunal’s order, and the ROC filing. A reduction that is completed without the creditor consent or the solvency statement is vulnerable to being set aside.
Call to Action: For Section 66 reduction structuring, creditor consent strategy, or NCLT petition support, contact office@anujdesaiassociates.com or 9619456656. Website: https://anujdesaiassociates.com. LinkedIn: linkedin.com/in/ca-anuj-desai-122547230.