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MAC has issued the National Company Law Tribunal (Procedure for Reduction of Share Capital of the Company) Rules, 2016 by notification dated 15.12.2016.

The Ministry of Corporate Affairs has issued the National Company Law Tribunal (Procedure for Reduction of Share Capital of the Company) Rules, 2016 by notification dated 15th December, 2016. The provisions of the section 66 for reduction of share capital came into force from 15th December, 2016 by the notification dated 7th December, 2016. 

Procedure of Reduction of Share Capital of the Company.

Under the provisions Section 66 of the Companies Act, 2013, a company, limited by shares or limited by guarantee and having a share capital, may reduce is its share capital, by special resolution subject to the approval of the Tribunal, in any of the following manners and amend the memorandum accordingly:

a. by extinguishing or reducing the  liability on any of it shares in respect of which Share Capital not paid;

b. by canceling any paid-up share capital which is lost or is unrepresented by available assets;

c. by paying off any paid-up share capital which is in excess.

However, the reduction is not possible, if the company is in default in repayment of any deposits accepted or any interest thereon.

The application or petition for reduction of share capital to the tribunal shall be made in Form RSC-1 along with:

1. List of Creditors indicating Class wise Name, address, and amount owed to them, duly certified by Managing Director (MD) if any or by two directors as true & correct.
   Note that such certificate cannot be made earlier than 15 days from the date of application or petition;
2. A certificate from the Auditor that the above list of creditors is correct as per the records of the company verified by him;
3. A certificate from the Auditor and declaration from a Director that the company is not in arrear of repaying deposits accepted or of interest thereon on the date of application;
4. Certificate from the Auditor that accounting treatment is in conformity with accounting standards while reducing the capital. In absence of this certificate, the tribunal shall not sanction the application

The copies of list of creditors must be kept at the registered office for inspection of desiring persons.

Within 15 days from the date of application, the tribunal shall, for seeking representation or objection, give notice or direct to give notice to:

1. the Central Government, Registrar of Companies in form RSC-2;
2. the Securities and Exchange Board of India, in case of listed companies, in form RSC-3; and
3. the Creditors of the company within 7 days or within such period as may be decided by the tribunal

The Tribunal shall also direct to get the notice, for seeking objection, published within 7 days in English and Vernacular Language Newspaper with circulation in the State of Registered Office in form RSC-4.

The Notice must contain the amount of the proposed Share Capital to be reduced, the place where the list of creditors be inspected, and time within which objection to be given. The maximum time for filing objection is 3 months from the date of publication.

The company or person who is directed to issue notice, shall within 7 days from the date of issue of notice give an affidavit in form RSC- 5 to the tribunal dispatch & publication of the notice.

The representation or objection shall require to be made within 3 months from the date of receipt of notice to the tribunal and a copy of the same shall also be simultaneously sent to the company. However, if during the said period no representation has been received by the Tribunal, it shall be presumed that they have no objection to the reduction.

The Company shall give its response, to the tribunal on the representation made, within 7 days of the expiry of the period upto which representation or objection was sought. The tribunal has full discretion to make such order as it thinks fit.

If the tribunal is of view that the debt or claim of every creditor has been discharged or determined or secured or his consent is obtained, it may make an order confirming the reduction of share capital in form RSC-6 on such terms and conditions as it may deem fit and shall issue Certificate in form RSC-7 under section 66 (5).

Such order of confirmation shall be published by the company in a manner directed by the tribunal. Further, the company shall file, orders and minutes approved by the tribunal, with the Registrar of Companies within 30 days from the receipt of the copy of the order.

The provisions of Section 66 shall not be applicable to the Buy-back of securities.

Important forms for Reduction of Share Capital

Forms	Purpose
RSC - 1	Application or Petition of to the Tribunal.
RSC - 2	Notice to the Central Government and the SEBI, in case of the listed company, for seeking Representations or Objections.
RSC - 3	Notice to the Creditors for seeking Representations or Objections.
RSC - 4	Notice to be published in Newspaper.
RSC - 5	Affidavit confirming issue and publication of Notice
RSC - 6	Order of Tribunal confirming Reduction of Share Capital
RSC - 7	Certificate issued by the Registrar under section 66 (5)

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