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What do you understand by reduction in share capital? Required conditions for reduction of share capital and what do you understand by reduction of share capital

 Meaning of decrease in share capital

 (Meaning of Reduction in Share Capital) To reduce the share capital of a company means to change it. In other words, when the share capital with the company exceeds the present and future requirements, then in such a situation the company can reduce its share capital.

A company can reduce its share capital in the following ways

(i) By canceling that part of the paid-up capital which is destroyed.

(ii) Paid-up capital, if there is more than the requirement, by paying the same to the shareholders.

(iii) by reducing the liability of the unpaid portion of the share which is not fully paid

(iv) The capital can be reduced by any other method if approved by the court.

A company limited by shares and a company limited by guarantee having share capital can reduce its share capital subject to the following conditions:


(i) the company has passed a special resolution intending to reduce the capital.

(ii) the company has obtained the approval of the Tribunal on that particular resolution.

(iiii) arrears on the company for repayment of public deposits or payments due thereon

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