Reduction of Share Capital: Section 66 of Companies Act 2013

Reduction of share capital is a crucial financial restructuring method that companies in India can use to modify their capital structure. Under Section 66 of the Companies Act 2013, a company, with the approval of the National Company Law Tribunal (NCLT), can reduce its share capital. This process is often undertaken to adjust losses, return surplus funds to shareholders, or realign capital in line with business objectives.

There are several ways to implement a reduction of share capital, including canceling unpaid share capital, extinguishing or reducing shareholder liability, or buying back shares. It allows companies to strengthen their balance sheets, improving financial flexibility. However, this action requires shareholder approval through a special resolution and strict adherence to statutory provisions to protect creditors and investors.

The reduction of share capital not only helps in restructuring the company’s finances but also provides businesses the opportunity to realign their strategies for future growth. Companies opting for this process must comply with legal requirements under the Companies Act, ensuring transparency and fairness throughout the procedure.