Reduction in Capital
Reduction of share capital can extinguish or reduce liabilities, cancel paid-up capital unrepresented by assets, or return excess capital to shareholders. Common scenarios include overcapitalisation or accumulated losses inhibiting dividends. In court-approved reductions, fairness and creditor protection are paramount. Creditors may object unless debts are discharged or secured, and the court ensures shareholders are treated equitably. Registration of the court order completes the process.
The SAP requires a directors’ declaration, detailing the company’s assets, liabilities, and solvency over 12 months, supported by an expert’s report affirming reasonableness. Failure to comply or unjustified declarations expose directors to personal liability for the company’s debts.
The reforms enable flexibility for private companies while safeguarding creditors, streamlining processes, and maintaining oversight through detailed procedural and filing requirements.
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