By Anika Mardiah Chowdhury

Shares are defined as a share capital of a company or part of securities and include stock as under section 2(84) of the Companies Act, 1994 Bangladesh. Shares are issued by companies for developing and growing the business. Also, for expansion of business or to increase its capital, a company borrows money from different creditors. A company, in certain circumstances, may decide to reduce its share capital if the reduction diminishes a company’s ability to satisfy its liabilities. Reduction of share capital includes subscribed Paid capital, not the authorized capital. The term capital from the share capital may mean many things; among them, Paid capital is the amount of money actually paid by the subscribers. This article will discuss the approach to reducing paid-up capital under the Company Laws of Bangladesh.

The reduction of paid-up capital may require many circumstances, such as trade losses and substantial losses of assets, to adjust the capital and assets, among others. In Tamil Nadu Newsprint and Papers Ltd. vs. Registrar of Companies (1995), the Madras High Court permitted the company to reduce its capital, which was found to be more than its needs, by allowing it to pay the same partly in cash and partly in the form of non-convertible debentures.

The conditions for the reduction of paid-up capital have been stated under section 59 of the Companies Act; they are-

In the beginning, the company must have authority given under its Articles of Association regarding the reduction of its capital. If it does not contain such provisions, then that must be altered and added.

In addition, for the consideration of capital reduction, a general meeting must be held to pass a resolution by convening a twenty-one days prior notice. Notice will be sent to all the Directors, Members, Auditors of the Company, Secretarial Auditor, and to others who are entitled to receive the notice of the General Meeting. The resolution must be passed by three-fourths of the majority members. In a case, the Court sanctioned that the reduction must approved by a majority of the equity shareholders, including the majority of non-promoter shareholders in [(2009) 151 Com Cases 251].

Next, suppose the company has passed a resolution for reducing share capital. In that case, it shall apply through a petition to the High Court of the Supreme Court of Bangladesh for an order confirming the reduction of capital according to Section 60 of the Companies Act. It is a legal obligation that the petitioners will disclose all the facts and show evidence that reduction is necessary for public interest or public policy.

Though a company has the right to determine the incidence of capital reduction along the reduCourt mode, the Court will always see whether the interests of the minority shareholders and the rights of the creditors are adequately protected or not. Also, when considering the reduction of cortical, the Court will consider the reason for such and whether the reduction is fair and equitable.

The Court found the bona fida intention for the capital reduction and the protection of creditors; then, under Section 64 of the Companies Act stCourtthat, the Court will order for such reduction if satisfied that every creditor of the company under the Companies Act is entitled to object to the reduction has given consent.

In Courtion, the Court may require or order the company to publish regarding such reductioCourto if the Court deems the causes behind such reduction as under section 69 of the Companies Act.

After the Court, the company shall submit documents as under section 65 of the Companies Act before the Register of the Joint Stock Companies and Firm. The documents are-

The reduction will take effect after the confirmation order from the Register of the Joint Stock Companies and Firm. The RJSC will register the same and issue a certificate of such reduction. It is to be mentioned that the certificate shall be conclusive evidence with respect to the reduction of the capital.

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In conclusion, it is to notify that if the reduction of share capital involves any contradiction with the payment to any shareholder of any paid-up share capital, then every creditor shall be entitled to bring objCourtn to the Court against such reduction as in the case of Manzurul Islam (Md) v ATN News Limited and others [2013] HCD [2013] 65 DLR 350 states that the persons having shares equivalent to not less than one-tenth of paid-up capital in the company can present an application against the action of the company.

 

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